Bank of England initiates sales of bonds purchased during recent UK market rout

As it was recently announced, the Bank of England is about to start selling the government bonds it had purchased as an emergency action to stop turmoil in British markets this fall.

The sales are scheduled to start on Tuesday, and the process will be managed in a “demand-led” way. As the central bank hopes, this would prevent another episode of market destabilization after the notable market chaos in late September. It’s expected that the selloff would become one more test of confidence for investors, as there already is a veritable avalanche of supply. The surge in supply is linked to a growth in government borrowing and the Bank of England unwinding the debt holdings accumulated during the pandemic.

According to Imogen Bachra from NatWest Markets, head of UK rates strategy, there are still high risks in the British market due to persistent instability and low liquidity. She believes that the country’s main financial authority would attempt to quickly sell its temporary holdings.

The sales will be organized on Tuesdays, Wednesdays and Fridays, and their results will play an important role as indicators of underlying demand. As it was stated by the financial authority, the debt would be sold competitively to bids, with the prices being mid-range or higher.