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El Banco de Inglaterra tiene dificultades de aplicar el QE (texto en inglés)

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Last week the Bank of England (BoE) announced, as part of its strategy to stimulate the British economy, its decision to cut the interest rate to 0.25% and the enlargement of asset purchase, aiming to buy 60m pounds of government debt over six months, including limited amount of corporate bonds. On Tuesday the BoE failed in its first attempt to buy more than a billion pounds of long-dated government debt in its programme bye three to six months –with a maturity over 15 years-  after it failed to find enough sellers.

In the first round, on Monday, investors offered to sell 3.63 times of 1.17bn pounds of gilts due between three and seven years that BoE was seeking, and on Wednesday for the seven to fifteen-year sector. On the second day programme, the BoE said it could only buy 1.12bn pounds of gilts.

After missing the target, felling 52 million pound short of its 1.17bn pounds target, some UK government debt bonds turned negative, driving up prices and pushing down the return to investors; bonds price rise, whereas, yields fall, and vice versa. On Wednesday morning gilts maturing were yielding -0.1%.

The BoE expects to roll over the 52m pounds it failed to buy this month later in the year. On the other hand, pension funds and other investors search for something paying reasonable level of interest, that is to say, gilts. Therefore, the slump in UK gilt yields trickled down pension funds shortfall and with such meagre offering, fund managers must expect even lower rates of return in the years ahead. Therefore, this is the reason of the struggle to achieve the goal of  the Tuesday’s auction, as pension funds are holding on gilts they already own, whereas, buying today it would not be a high income as it was before BoE’s QE enlargement programme.

Nontheless, the BoE, despite the first auction outcome, launched a reserve auction, to persuade investors to sell bonds of 15 years of maturity, rather than longer bonds, hoping 1.17bn pounds being acquired on gilts. However, according to Mike Amey, head of sterling portfolio management at Pimco, said “the fact that the BoE will deal with the shortfall in 3-6 months time suggest that they believe there is a risk of another operations where the offers do not cover what they are looking to buy”.

What’s more pound sterling hovered at US$1.30, since mid-July overnight, as investors turned their attention to falling gilt yields.

 

 

 

 

 

 

 

 

 

 

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