Bank of England plans £52 million gilts buy to bring QE up to speed

Injection: The Bank of England, led by governor Mark Carney, is to buy an extra £52m of gilts later this year

REUTERS

Russell Lynch10 August 2016

The Bank of England today said it will buy up an extra £52 million in gilts later this year to keep its £60 billion money-printing plans on track.

Threadneedle Street only managed to buy £1.12 billion of the £1.17 billion in longer-term 15-to 30-year government bonds in its second auction under the latest round of quantitative easing announced last week.

Pension funds are reluctant to sell gilts as they need them to back rising pension liabilities.

Former pensions minister Ros Altmann said the failure underlined a “vicious circle” where falling gilt yields drive up pension deficits and make funds more reluctant to sell.

She warned: “The lower gilt yields go, the bigger pension deficits become, and that leaves advisers and trustees for pension schemes being told they need to cut risks because the strength of their employer to back the scheme has fallen and they’re told to increase the amount of long term bonds that they hold, in particular gilts.

"As the BoE is trying to stimulate the economy by cutting rates, what it is doing is weakening companies, whose pension deficits keep going up.”