The Bank of England said Thursday that it is reducing the
size of its U.K. government bond purchases to GBP4.5 billion next week, from
GBP6.5 billion per week recently, to ensure it can afford to keep buying
private-sector securities under its quantitative-easing policy.
The BOE will conduct a GBP2.25 billion reverse auction of eligible gilts
maturing in the 2022 to 2030 range Monday, with another GBP2.25 billion
operation covering 2015 to 2019 maturities scheduled for Wednesday.
It also said it will exclude the 4.75% 2020 gilt from its buyback auctions
"until further notice," citing the fact that it now owns 70% of the free float,
or the total amount of that gilt in issue, excluding government holdings.
Earlier Thursday, the BOE's Monetary Policy Committee surprised investors
when it decided not to increase the GBP125 billion of public and private
securities that it is buying with freshly created central bank money - a policy
known as quantitative easing.
"In order to ensure that purchases of private-sector assets can continue to
be financed through the creation of central bank reserves over the next month,
the bank is reducing the size of the individual gilt purchase auctions," the
BOE said in a statement.
As a result, gilt purchase operations are expected to continue until July 29,
one week before the MPC's next meeting, it said.
"The bank will continue to keep the identity of gilts eligible for purchases
under the APF [Asset Purchase Facility] under review, in light of the
proportion of the 'free float' that it holds and their relative richness to the
curve," it added.
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