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Bank of England to start selling emergency gilt purchases from Nov. 29

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LONDON — The Bank of England will start later this month to sell off some of the 19.3 billion pounds ($22.5 billion) of bonds which it bought to quell market turmoil in the wake of former prime minister Liz Truss’s Sept. 23 mini-budget.

The BoE intervened in the British government bond market between Sept. 28 and Oct. 14, buying long-dated and index-linked gilts to halt a fire sale of assets by British pension funds which were caught out by unprecedentedly sharp price falls.

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Last week a senior BoE official, Andrew Hauser, said it was important for these purchases to be reversed in a “timely” way, and that more details would be coming soon.

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In a statement on Thursday, the BoE said it would be open to offers from investors to buy the bonds from Nov. 29 onwards.

Unlike the BoE’s separate program of auctions to unwind some of its more than 830 billion pounds of quantitative easing bond purchases, these sales will not take place at a fixed pace.

Instead, investors will be able to submit bids to the BoE to buy bonds and the central bank will accept these at its discretion, meaning the amount of bonds sold will depend on demand.

“As a general principle only bids that are deemed attractive relative to prevailing market levels will be accepted,” the BoE said. It called the plan “a demand-led approach to unwind recent financial stability gilt purchases in a timely but orderly way.”

British government borrowing costs have largely returned to their level before the mini-budget, after most of the 45 billion pounds of unfunded tax cuts were reversed, Truss quit and was replaced by her Conservative Party leadership rival Rishi Sunak.

New finance minister Jeremy Hunt is expected to announce around 50 billion pounds of

fiscal tightening

in a budget statement on Nov. 17. ($1 = 0.8578 pounds) (Reporting by David Milliken; Editing by Sachin Ravikumar and William Schomberg)


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