BREAKINGVIEWS — The BoE is backing the UK’s debt, and that’s fine

(The author is a Reuters Breakingviews columnist. ) By Jon Sindreu LONDON, Sept 18 (Reuters Breakingviews) — Rather than dump their full stash of long-term bonds into a fragile market, officials will keep £120 bln and sell some to the Treasury. It erodes the pretence that the central bank isn't involved in government debt management, which could better align supply with investor demand. Full view will be published shortly.

Follow Jon Sindreu on X and LinkedIn. Context News The Bank of England said on September 17 that it will reduce its £488 billion portfolio of sovereign bonds, which it acquired during "quantitative easing" programmes following the global financial crisis and the Covid-19 pandemic, at a pace of £46 billion a year until the end of 2034. Of that, £20 billion will be active sales, and the rest will come from letting bonds mature. This compares with an annual average reduction of £89 billion over the past four years, including gilt sales of £32 billion.

Officials said that the £222 billion of gilts with redemption dates earlier than 2035 won't be sold, but rather held to maturity. Also, the BoE will retain £120 billion to back banknote issuance. For the remaining £146 billion, the central bank has been drawing up plans with the Treasury so that they could be sold directly to the government's Debt Management Office at market prices. This means that a big chunk of long-dated bonds, which have been trading at big discounts, wouldn't hit the market.

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