BoE Holds Rates, Pauses Gilt Sales; Pound and Yields Slip
The Bank of England left interest rates unchanged and paused gilt sales for six months, halting long-dated sales entirely, sending the pound and gilt yields lower.
The Bank of England kept its benchmark interest rate unchanged on Thursday and announced a six-month pause in government bond sales under its quantitative tightening programme, adding that it would stop selling long-dated gilts altogether.
The decision rippled through UK markets. The yield on the 10-year gilt dropped 6 basis points to 5.243%, marking its lowest level in a week as bond prices climbed. Sterling weakened 0.1% against the dollar to $1.3364, a seven-week low.
Equities moved in the opposite direction. The FTSE 100 extended its gains and was last up 0.6%, touching its highest level in more than a week.
The pause in bond sales signals a cautious approach from the central bank as it balances its balance-sheet reduction against market conditions. By halting long-dated gilt sales entirely, the Bank avoids putting further pressure on the long end of the curve, where yields had been elevated.
Investors appeared to welcome the move, with the fall in yields reflecting increased demand for UK government debt. The softer pound, meanwhile, suggested markets were pricing in a more accommodative stance than previously expected.