21 października, 2022

Bank of England bond stockpile incurs first loss for UK public finances – Reuters

LONDON, Oct 21 (Reuters) – The Bank of England’s stockpile of government bonds has incurred the first loss for the public finances since the central bank launched its quantitative easing programme in 2009, data showed on Friday.

Rising borrowing costs led to a 156 million-pound ($174 million) net loss in September from the portfolio of gilts held by the BoE, according to data from the Office for National Statistics.

The British Treasury indemnifies the BoE for its bond portfolio which until now has generated profits for the public finances.

The BoE bought almost 900 billion pounds of mostly government bonds and some corporate bonds between the global financial crisis and the coronavirus pandemic.

British banks hold around 950 billion pounds of reserves at the BoE, largely as a result of the 838 billion pounds of QE purchases that the central bank has yet to reverse.

Banks are paid interest on those reserves at the BoE’s benchmark rate. That was 0.1% until less than a year ago, but it now stands at 2.25% and is forecast by markets to top 5% next year.

Last week, former BoE deputy governor Paul Tucker said the government should review the way the BoE pays interest to the banks, saying it could save 30-45 billion pounds a year.

Earlier this week, Britain’s finance ministry said it had earmarked a transfer of more than 11 billion pounds to the BoE to cover losses relating to its bond-buying in the current financial year.

The BoE said earlier this year that it had transferred a total of 120 billion pounds to the Treasury in profits from QE since it began buying bonds in 2009.

($1 = 0.8984 pounds)

Writing by William Schomberg; Editing by Hugh Lawson

Our Standards: The Thomson Reuters Trust Principles.

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