BOE says it will unwind gilt market intervention once risks have subsided

THE Bank of England (BOE) will unwind its gilt market intervention when risks to market functioning have subsided and based on an assessment of market conditions and the scale of purchases it has made, the bank said in a letter published on Thursday (Oct 6).

“Once the purchase programme is complete, the operation will be unwound in a smooth and orderly fashion once risks to market functioning are judged by the bank to have subsided,” BOE deputy governor Jon Cunliffe said in a letter sent to Parliament’s Treasury Committee.

“The approach to unwind will depend, among other things, on the scale of actual purchases, the market conditions during those purchases and the market conditions when the purchases end.”

The letter was in response to questions from the Treasury Committee chair Mel Stride seeking explanation on why the BOE took the “unusual” step to intervene, and what potential implications the intervention could have for monetary policy.

On Sep 28, the BOE launched a programme to potentially buy up to £65 billion of gilts with a maturity of 20 years in a series of operations running until Oct 14, in a bid to tame soaring yields which threatened financial market stability. REUTERS