The Bank of England has become the first major central bank to sell bonds back to financial markets, as it presses ahead with plans to unwind the quantitative easing programme, through which it holds almost £850bn of gilts.
The BoE on Tuesday sold £750mn of short-term government debt as it embarked on an effort to trim its balance sheet by £80bn over the coming year. The sale marks a reversal of more than a decade of successive waves of QE which followed the global financial crisis, the Brexit vote in 2016 and the onset of the Covid-19 pandemic.
The UK central bank had already begun the process of so-called quantitative tightening in February this year by not reinvesting proceeds of maturing bonds that it holds, a step also taken by the US Federal Reserve. But Tuesday’s operation was the first under the BoE’s plans for “active” QT.