16.01.23, 00:09
Bank of England Made £3.5 Billion Profit on Emergency Bond Market Intervention - Bloomberg
Economics
Central Banks
BOE Made £3.5 Billion Profit on
Emergency Bond Market
Intervention
Central bank sells off last bonds, unwinding portfolio
BOE still faces over £100 billion of losses on QE facility
The statue of Ariel at Tivoli Corner on the Bank of England. Photographer: Jason Alden/Bloomberg
By David Goodman and Philip Aldrick
12. Januar 2023 um 14:01 MEZ
The Bank of England made a profit of about £3.5 billion on September’s emergency bond market
intervention after selling off the final bonds on Thursday.
The central bank bought almost £19.3 billion of long-term government debt following then-Prime
Minister Liz Truss’s disastrous budget last year. The BOE stepped in to prevent a shock in the gilt
https://www.bloomberg.com/news/articles/2023-01-12/boe-made-3-5-billion-profit-on-emergency-ldi-gilt-purchases
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16.01.23, 00:09
Bank of England Made £3.5 Billion Profit on Emergency Bond Market Intervention - Bloomberg
market from turning into an economic crisis.
The purchases were made in just over two weeks through the middle of October, and sales began
on Nov. 29. On Thursday, the BOE said sales were completed.
Buyers paid a total of about £22.8 billion, bagging the BOE a £3.5 billion gain – an 18% return.
The BOE intervened in late September to stabilize core markets as liability driven investment funds
dumped around £70 billion of gilts to raise cash to meet margin calls. The sell-off caused a spike in
yields that caused mortgage rates to jump over 6%.
It was the first test of the BOE’s emergency market-maker-of-last-resort facility, a version of its
financial stability bail-out arrangement for banks under which it buys assets to stabilize prices.
The speed of the unwind testified to its success. The BOE said the sales had not disrupted the
market, a sign that confidence in UK assets is stabilizing after the panic last year.
“The gilts in this portfolio were made available to interested buyers via reverse enquiry windows,”
the BOE said in a statement Thursday. “This approach helped ensure that the unwind was
responsive to market demand and did not trigger renewed dysfunction.”
The profit booked on the gilts stands in marked contrast to its formal quantitative easing program,
under which the BOE bought £875 billion of gilts between 2009 and 2021 as part of monetary
policy aimed at limiting interest rates in financial markets.
Those gilt holdings also are now being sold off and are carrying well over £100 billion of losses. The
Treasury last year cleared an £11 billion transfer to the BOE to cover potential losses as QE is
unwound under the indemnity it provided in 2009.
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