Bank of England Pauses Gilt Sales Until April

UK government borrowing costs declined on Thursday after the Bank of England announced a revision to its quantitative tightening schedule. Bloomberg Economics reported that the central bank adjusted how it manages excess gilts accumulated during the previous decade to ease pressure on the bond market.

The new plan dictates that the institution will suspend all disposals from its £488 billion portfolio until April. This temporary halt provides immediate relief to a market where rising borrowing costs had emerged as the central bank worked down its balance sheet.

The schedule also entails a permanent change to the composition of sales. The central bank will cease the disposal of long-dated bonds entirely. This shift removes a specific supply of long-term government debt from the market, addressing concerns about the duration of the assets being sold.

The move constitutes a significant adjustment to the quantitative tightening program. By halting all sales and eliminating long-dated disposals, the Bank of England has altered the trajectory of liquidity withdrawal from the gilt market. The response in borrowing costs indicates that the market welcomed the reduction in sell-side pressure.