BoE Pauses Gilt Sales, Sparking Rally in British Bond Market

The Bank of England has announced that it will pause its active gilt sales for six months, which has sparked a major rally in the British bond market.

The decision was made after the BoE held interest rates steady at 3.75%, as expected by analysts, but projected inflation above 4% next year amid Middle East energy tensions.

'Reducing gilt sales and then abolishing them totally for the long-end is absolutely a positive,' said Mohit Kumar, chief European economist at Jefferies.

The BoE's announcement has led to a sharp drop in UK gilt yields, with 30-year yields falling by around 11 basis points to 5.75% and 10-year yields dropping by 7 basis points.