Bank’s post-Brexit strategy hits snag as gilt buyback falls short

The Bank of England’s post-Brexit economic recovery plan got off to a stumbling start when it was unable to buy as many government as it needed from major City investors.

 

Threadneedle Street will spell out on Wednesday how it plans to get reluctant investors to part with government bonds – also known as gilts – in order to provide additional stimulus to the economy under its new £60bn quantitative easing (QE) programme.

 

The Bank enacts its electronic money-printing exercise – which was launched in March 2009 and was one element of a stimulus package to kickstart the economy announced last Thursday – by buying gilts.

 

One of the other key measures – a quarter-point cut in to 0.25% – has also run into problems, with some high street banks unwilling to pass on fully cheaper borrowing costs to their customers.

 

The Bank offered on Tuesday to buy back £1.17bn of long-dated gilts – those with a maturity of 15 years or more – but received offers of only £1.11bn, leaving it with a shortfall of £52m. It is the first time since the Bank started buying back bonds that it has failed to attract enough sellers.

 

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