The Bank of England (BoE) has purchased more than £3bn worth of long-dated gilts as part of its latest stimulus package, after failing to meet targets last week.
Investors took advantage of the sharply higher bond prices that followed the central bank's botched attempt last week, allowing the BoE to comfortably meet the £1.17bn worth of bond purchases targeted as part of the most recent quantitative easing programme.
The BoE's success spurred a minor sell-off in British government bonds, with yields on benchmark 10-year gilts, rising from a record intraday low of 0.5% on Monday to 0.58%, while 30-year bond yields rose 5bps to 1.32%, according to the Financial Times.
Last week, pension funds and insurance companies, which tend to invest in long-dated UK bonds to match liabilities, rejected the BoE's approaches despite receiving above market level offers.
Many analysts predicted that this initial shortfall would lead to increased publicity for the purchase plans and higher gilt yields, giving investors more incentive to sell.
The package of monetary-easing measures was unveiled earlier this month as governor Mark Carney (pictured) also announced a 0.25% cut in interest rates.
The programme is designed to cushion the economy from the blow the UK's vote to leave the EU might have.
PP has looked at how the structural imbalances in the gilt market have worsened since the central bank's decision to expand QE, and why it spells bad news for defined benefit schemes.
Analysis from Hymans Robertson shows the funding deficit surpassed £1trn for the first time on 12 August, just days after the BoE failed to find enough sellers to complete its first tranche of QE.
The government will set up an infrastructure bank to support investment and to co-invest alongside investors including pension funds.
The Retail Prices Index (RPI) will be reformed and aligned with the housing cost-based version of the Consumer Prices Index, known as CPIH, by 2030, the Treasury has confirmed.
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