Bank of England Bond Sales Are Doing More Harm Than Good

The UK government bond market has had a challenging time of late. The autumn mini-budget crisis sent yields soaring, requiring a £19 billion ($24 billion) bond-buying intervention from the Bank of England to calm things down. Unfortunately, aftershocks are still being felt as a flood of supply is beginning to overwhelm investor demand. The central bank, with its trailblazing quantitative-tightening program, needs to step more carefully.

The 10-year gilt yield at 3.8% is noticeably higher than the 3.5% on its US equivalent. UK debt has also underperformed German bunds by more than 60 basis points since early February, despite the European Central Bank being even more determined to keep raising interest rates than its UK counterpart.