Gilts have slipped after the Bank of England’s latest purchase of mid-term government debt passed smoothly with strong demand to sell.

The BoE purchased a £1.17bn slug of mid-term gilts (with maturities of 7-15 years), but it received offers from investors looking to sell it 3.1 times that amount, up from 2.85 times at the last mid-term gilt purchase.

Every issue the BoE bought was heavily oversubscribed, meaning the bank was not forced to pay the kind of hefty premium it has had to fork out when buying long-term paper.

The benchmark 10-year gilt yield has jumped 3 basis points to 0.57 per cent following the reverse-auction, while the 30-year yield has climbed by the same amount.

This is a stark contrast to the reaction seen after yesterday’s long-term gilt buyback, when prices surged and yields dropped sharply after the BoE was forced to stump of a hefty premium to convince investors to part with their paper.

Even so, today’s reverse auction was an improvement on the first long-term gilt buyback, when the BoE suffered its first ever shortfall and sparked a powerful rally that hammered long-term gilt yields to record lows.

Here’s how the market reacted to yesterday’s gilt buyback:

Get alerts on Bank of England when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Comments have not been enabled for this article.

Follow the topics in this article