Bank of England successfully completes second round of bond buying

The Bank of England successfully completed its second round of bond buying on Tuesday after failing to find enough sellers last week.

The central bank bought £1.17 billion worth of long-dated government bonds as part of its quantitative-easing programme to stimulate the economy.

The “reverse auction” was oversubscribed by almost 2.7 times, which helped restore confidence in the Bank’s plan after a £52 million shortfall last week pushed bond yields in the UK and Europe down to record lows.

The yield on the benchmark 30-year gilt fell to a record low of 1.18% on Thursday. Thanks to the strong response to Tuesday’s purchases, it has since risen to 1.32%.

“There has been a collective sigh of relief in government bonds markets today,” Mike Amey, head of sterling portfolios at Pimco, told The Financial Times.

“The BoE intends to buy long-dated gilts every week for the next six months, so two uncovered buy backs early on would have been very unfortunate. It would have risked a loss of confidence in the Bank’s ability to conduct monetary policy.”

The BoE plans on buying £60 billion of government debt over the next six months.