View: BoE demand to keep back of the curve steep, close 30yr-10yr flattener
It wasn’t a great surprise to see the BoE dust of its tool bag this morning, delivering a further £50bn increase in its asset purchase programme while leaving base rates on hold at 0.50%, as we and pretty much the rest of the market expected. There had been some calls for more (£75bn), as a signal of intent really, but the bank doesn’t look particularly constricted by delivering ‘just’ another fifty which will be deployed over the next four months, bringing the printing cycle back into line with the quarterly inflation reports. We were disappointed as to how this cash will be disbursed, evenly across the existing maturity buckets when we’d been hoping for some additional duration. It will be interesting to see how this impacts liquidity, currently the BoE won’t buy bonds once its holdings hit 70% of outstanding stock, the GBP375bn QE programme in comparison is equivalent to around 37.5% of UK debt stock.
Full report below…
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