UK government borrowing costs rise after Bank denies it will delay bond sales
UK government borrowing costs have risen after the Bank of England dismissed a report that it could delay the sale of billions of pounds of bonds in an attempt to boost market stability after the mini-budget.
The yield – or interest rate – on 10-year government bonds rose by more than 0.1 percentage points to trade above 4% after the central bank said the report in the Financial Times was inaccurate.
Threadneedle Street’s rate-setting monetary policy committee (MPC) announced plans last month to begin selling £80bn of UK government bonds from 31 October to wind down the portfolio of assets it had built up under its quantitative easing programme since the 2008 financial crisis.
The process to scale back the £838bn of bonds – or gilts – on its balance sheet is known as quantitative tightening (QT), considered by economists as one of the Bank’s most powerful tools for tackling inflation, which recently rose to its highest rate in 40 years.
Questions have been raised after the market meltdown sparked by Kwasi Kwarteng’s mini-budget last month. The FT said the start of the process would be delayed, with the Bank’s top officials of the view that gilt markets had been “very distressed” in recent weeks.
The Bank dismissed the accuracy of the report. A spokesperson said: “This morning’s FT report that the BoE has decided to delay MPC gilt sales (‘QT’) is inaccurate.”
The government’s borrowing costs rose on financial markets across short and long-term bonds after the statement. The pound fell by 0.7% against the dollar on Tuesday morning, trading at below $1.13.
Speculation over a delay has been mounting after the government said it would announce revised debt-cutting plans on 31 October, the same day as the Bank plans to begin its sale
Read more on theguardian.com
