BoE doubles daily bond buying limit to £10bn

Written by Adam Cadle

10/10/2022

The Bank of England (BoE) has increased the daily buying limit of its bond intervention from £5bn to £10bn, in an attempt to calm fears of a pension fund sell-off.

In a statement today, the Bank confirmed it is to increase the size of its daily auctions to ensure there is sufficient capacity for gilt purchases ahead of Friday 14 October

The move to purchase up to £65 billion of gilts was first announced on 28 September amid concerns liability driven investment (LDI) strategies operated by defined benefit (DB) pension funds could be forced to sell gilts to meet hedge fund collateral calls.

To date, the BoE has carried out eight daily auctions, offering to buy up to £40bn, and has made around £5bn of bond purchases. The Bank confirmed that it is prepared to deploy this unused capacity to increase the maximum size of the remaining five auctions above the current level of up to £5bn in each auction. The maximum auction size will be confirmed each morning at 9am on Friday and will be set at up to £10bn in today’s operation.

The Bank’s existing reserve pricing mechanism will remain in operation during this period.

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