UK Gilts Yields Surge, Ten Fund Managers Urge BoE to Halt Bond Sales
Yields on UK government bonds, or gilts, have surged over the past year, reaching some of the highest levels among G7 nations. Ten fund managers have urged the Bank of England (BoE) to halt its quantitative tightening programme, citing increased market volatility and rising borrowing costs in the world market today.
The yields on 10-year gilts have climbed 61 basis points (bps) to 4.47% over the last 12 months, while 30-year gilts have risen 89bps to 5.56%. The BoE's quantitative tightening, which involves selling government bonds, is being blamed for driving up these yields in the stock market today. Some market participants argue that this policy is burdening taxpayers and exacerbating the UK's fiscal woes.
The BoE had initially planned to sell £100 billion worth of bonds over the next 12 months but slowed this to £70 billion in September. Despite this, the programme is now costing the government £22 billion a year. Since 2012, the net cash flow benefit to taxpayers has been £34 billion, with the value of gilts on the BoE's Asset Purchase Facility balance sheet standing at £558 billion.
With yields on gilts continuing to rise, ten fund managers have called on the BoE to scrap its bond sales entirely. They argue that the current policy is increasing market volatility and driving up long-term government borrowing costs in the stock market today. The BoE must weigh these concerns against the potential benefits of quantitative tightening in controlling inflation.
