LONDON (MNI) – Cover at the Bank of England’s 10-25 year reverse
gilt auctions came in at just 1.29, raising further questions over how
fast the central bank can continue to buy gilts.
This was down from 2.06 at last week’s reverse auction for the same
maturities. Cover ratios have tended to decline as the BOE has gone
ahead with its current round of Stg75 billion of quantitative easing,
although Tuesday’s over-25-year auction saw surprisingly strong cover.
BOE officials believe the Bank could well run into difficulties
covering their gilt auctions if they were to step up the pace of QE.
Executive Director Markets Paul Fisher, in evidence to the Treasury
Select Committee on Nov 28, said of the current “run rate” for gilt
purchases – “The markets at the moment are not functioning fully,
generally across a whole range of asset markets, so I think we are going
about the right rate.”
“We could go faster … The faster we go the more risk is that some
of our operations don’t quite deliver the amount of gilts we want to
purchase,” he added.
–London newsroom 0044 20 7862 7491; email: drobinson@marketnews.com
[TOPICS: M$B$$$,M$$BE$,MMBBE$]