BoE Bond Sales Under Fire as Borrowing Costs Climb

A growing coalition of City analysts and fixed-income investors is urging the Bank of England (BoE) to immediately halt its aggressive bond-selling program.

Critics argue that the central bank's unique approach to quantitative tightening (QT) is artificially inflating the UK government's long-term borrowing costs, penalizing taxpayers by billions of pounds, and destabilizing the broader gilt market.

The BoE has amassed over GBP 800 billion in UK government bonds, known as gilts, through quantitative easing (QE) to suppress interest rates and stimulate the economy. Now, tasked with fighting stubborn inflation, Governor Andrew Bailey is throwing the engine into reverse via QT.

However, the BoE's execution of QT is uniquely aggressive. Instead of simply letting the bonds mature and roll off the balance sheet organically, the BoE is conducting 'active quantitative tightening,' which involves deliberately selling billions of pounds worth of long-dated gilts directly into the financial markets.