Economics
U.K. Reaps $13 Billion of Interest From Own Debt in QE Quirk
- UBS calculates BOE holdings are earning interest rate of 1.4%
- Benefit for Treasury has increased after policy action in 2020
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The U.K. Treasury is getting almost 10 billion pounds ($13 billion) a year in interest on its own debt under the Bank of England’s bond-buying plan.
That’s the curious result of a massive increase in bond issuance to fight the pandemic crisis, combined with the dramatic reduction in BOE interest rates. The government is currently earning about 1.4% annually from more than 700 billion pounds of gilts that are held by the BOE, according to calculations by UBS strategist John Wraith.