Gilts Jump as BOE Says Income From QE to Cut U.K. Debt

(Corrects percentage-point change in third paragraph.)

U.K. government bonds surged as the Bank of England said it plans to transfer cash it receives as coupon payments from gilts held as part of its asset-purchase plan to the Treasury.

The intention of the government “is to use any funds transferred to the Exchequer to reduce the stock of outstanding government debt,” Governor Mervyn King said in a letter to Chancellor George Osborne today. Maturing debt won’t be transferred to the Exchequer, King wrote.

The yield on 10-year gilts fell as much as 10 basis points, or 0.1 percentage point, to 1.67 percent, the lowest since Sept. 10, and was at 1.68 percent at 12:31 p.m. London time.

To contact the reporter on this story: Neal Armstrong in London at narmstrong8@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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