BOE announces intention to purchase index-linked gilts

Dhwani Mehta FXStreet

The Bank of England (BOE) announced in a statement on Tuesday, it will temporarily pause corporate bond sale operations this week.

Additional takeaways

Intends to purchase index-linked gilts

Purchase of linkers will take effect from Oct 11 to Oct 14

Linker purchases will act as backstop to restore orderly market conditions

Linker purchases are time-limited, indemnified by treasury

Has consulted with debt management office

Repeats that it stands ready to purchase up to 10 bln stg of gilts each day

Purchase of long-dated conventional gilts unaffected by latest announcement on linkers

Size of each linker purchase operation will be up to GBP5 bln.

Will set minimum yield that will be applied to temporary purchases of linkers.

Will not allocate offers for linkers at real yields below levels observed at close on Monday.

Would be likely to accept most offers above market mid-yields at close of linker purchase operation.

Purchase of linkers to take place at 1315-1345 GMT, conventional long-dated 1415 GMT to 1445 GMT.

Intends to purchase linkers with residual maturity of three years and above.

Market reaction

GBP/USD is fading its bounce, battling 1.1000 on the BOE headlines. The cable jumped to near 1.1040 after the mixed UK jobs report. The spot is down 0.43% on the day.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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