BoE must sell emergency bond purchases in ‘timely’ way – Hauser

By David Milliken

LONDON (Reuters) -The Bank of England must sell in “a timely and orderly” way the 19.3 billion pounds ($21.7 billion) of government bonds which it bought as part of its recent emergency operation to support the market, a senior BoE official said on Friday.

The BoE was forced to step in to buy long-dated and index-linked gilts to halt a fire sale of assets by British pension funds following former prime minister Liz Truss’s Sept. 23 ‘mini-budget’.

“We must execute a timely and orderly unwind of the assets accumulated as part of the financial stability purchase operations, whilst also delivering the MPC’s QE unwind programme,” Andrew Hauser, the BoE’s executive director for markets, said in a speech at a European Central Bank conference.

When the programme was launched, the BoE said it would sell the bonds purchased “in a smooth and orderly fashion once risks to market functioning are judged to have subsided”.

Hauser said the BoE still needed “to remain sensitive and, if necessary, appropriately responsive to still-febrile market conditions”.

British government bond yields are broadly back to where they were before the mini-budget – following the reversal of most measures in it and the replacement of Truss as prime minister by former finance minister Rishi Sunak.

However, Hauser said liquidity in the gilt market had not yet fully recovered.

The BoE started the sale of short- and medium-dated gilts from its separate 838 billion pound quantitative easing stockpile on Tuesday, but postponed plans to begin selling long-dated gilts this year because of the market turmoil.

($1 = 0.8910 pounds)

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