Bank of England Will Start Reversing its Credit QE in September
(Bloomberg) -- The Bank of England will start selling off its 20 billion-pound ($24.9 billion) corporate bond portfolio in September, unwinding support for the credit market in place since the aftermath of the Brexit referendum.
The central bank’s plan is to complete the process by early 2024 at the latest, with the pace of sales to fluctuate over time, it said in a market notice on Thursday. The move follows a series of interest-rate hikes, with policy makers voting 6-3 to raise rates again by 25 basis points to 1%.
“Given the aim of limiting any market disruption, sales are intended to be gradual but responsive to conditions,” according to the notice. The bank said it is considering “concentration, liquidity and -- to the extent consistent with wider aims -- climate considerations” when designing the sales program.
Bonds maturing after April 2024 will go to sale, with the BOE intending to hold shorter notes to maturity. It is also “open” to selling bonds back to the companies that issued them.
The BOE began buying corporate bonds a few months after the referendum to leave the EU in 2016 and boosted the size of the program following the coronavirus outbreak. It currently holds just under 20 billion pounds of company debt.
The bank will release more details on the credit sales in August.
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