- Operation last week saw too few gilts offered to meet target
- Bank aiming to buy 60 billion pounds of debt over 6 months
The Bank of England moved on from its early quantitative-easing hiccup, successfully attracting enough offers of longer-dated U.K. government bonds to meet its weekly target.
The central bank purchased 1.17 billion pounds ($1.5 billion) of gilts due in more than 15 years on Tuesday, after an operation last week drew just 1.118 billion pounds of offers, falling short of its target and sparking speculation officials may struggle to find enough bonds to complete their planned program.
The operation may bolster confidence in the policy and help drive gilt prices lower. A miss at last week’s reverse auction of the same maturity debt -- the first uncovered QE operation in the plan’s history -- led to the BOE accepting all submissions, even as some investors offered prices above the prevailing market.
Offers amounted to 2.67 times the target on Tuesday. The central bank’s operations that targeted shorter-dated debt attracted offers of more than three times: two for debt due in three-to-seven years and one for the seven-to-15 year bucket.
No offers were made for one of the bonds it listed, a 4.5 percent gilt expiring in 2042. Since the BOE last engaged in QE purchases in 2012, global bond yields have tumbled, meaning investors may be less willing to part with longer-maturity bonds that tend to offer higher yields than their shorter-term equivalents. Long-dated U.K. bonds are in particular demand from pension companies.
The yields on U.K. bonds due in more than 15 years have already fallen by almost 20 basis points on average since the auction on Aug. 9, while 10- and 30-year yields have fallen to record lows.
Thirty-year gilts fell after the operation, with the yield climbing five basis points to 1.32 percent at 3:05 p.m. London time. It touched a record 1.185 percent last week.