GBP/USD, EUR/GBP flows: long end rallies out of APF announcement
APF announcement sees a pause as it discusses shift to purchases to the government via the DMO
Thereafter, average sales seen around £46bn, with a freeze on sales outside of (partially) 2049
The other part of the BoE’s business today is the asset purchase facility, and here the BoE has come to a more involved decision.
In the near-term, APF auctions will be paused while the Bank reviews a model of selling gilts to the Government, with a decision by Apr27. As already indicated prior, the Bank is looking to shift to an approach that sees direct sales to the Debt Management Office (DMO)
Thereafter, the long-term plan is for annual sales of £20 billion alongside maturing gilts, giving average total annual sales of £46bn implied by the decision to retain £282bn to maturity, with £120bn longest dated retained for the purpose of backing banknote issuance (“part of the APF’s holding of the 1.75% 2049 gilt, and all gilts that mature after that”).
Long end gilts enjoying some relief from the actions and the 6-month freeze. Estimates suggest that the long end had seen anything from 20bp to multiples of that in terms of added yield pressure from the selling process. GB30s down around 8-9bp on the day vs around -2bp for US