BoE gilt buyback scheme falls short by £52m

The Bank offered to buy back £1.17bn of government bonds, but received offers totalling £1.11bn.

It is the first time the Bank has failed to attract enough sellers since it started buying back bonds in 2009.

Yields on long-dated government bonds have now fallen to record lows.

Last week, the Bank announced plans to buy 60 billion pounds of UK government bonds over the next six months as part of a package of measures designed to provide additional monetary stimulus following the Referendum.

In a statement, the Bank of England said: "The Bank will incorporate the £52m shortfall from yesterday’s uncovered operation within the second half of the current six-month purchase programme.

"As set out in the Market Notice of 4 August 2016, details of these purchases will be announced on 3 November 2016."

Darren Bustin, Head of Derivatives at Royal London Asset Management, commented: “The Bank of England fell £50m short in its gilt purchase target for yesterday, and even then only secured this much by paying well above market price for some of these gilts. Today’s announcement has the Bank kicking the can down the road and has created a ‘wait and see’ scenario for investors looking at reasons for the failure.

“Longer term, if quantitative easing continues to fail this could mean a fiscal response such as a VAT cut of 2.5% in the Autumn Statement as the Treasury steps in. This could help to curb inflation as the Bank of England is currently forecasting medium term inflation above its stated 2% target.”