Gilt yields plumb fresh record lows, as BoE's QE launch stumbles

The Bank of England said it would look to make up for the previous session's lacklustre results at a reverse auction to purchase £1.17bn of long-dated Gilts during the second half of its extended programme of quantitative easing.

In the previous session, which was just the second day of its second QE programme, the BoE received offers for just £1.17bn worth of Gilts maturing in at least 15 years time.

Tuesday's shortfall was interpreted by some observers as a first stumbling block in the monetary authority's attempt to convince investors to part with such instruments, although some analysts believed it was just the natural result of poor summer-induced liquidity conditions in the market.

Some institutional investors, such as pension funds or insurance companies, have been under intense pressure to find sufficiently safe long-term assets to match their very long-term liabilities.

To take note of, perhaps, some analysts highlighted how the BoE opted not to make up the shortfall on Wednesday, which might be a possible indication of caution on its part.

Details of the purchases would be unveiled on 3 November, the BoE said.

On 3 August, the Monetary Policy Committee decided to pursue another £60bn in Gilt purchases in order to forestall risks to the economy in the aftermath of the referendum vote.

As of 09:47 BST the yield on the benchmark 10-year Gilt was lower by five basis points to 0.536%, having hit an intra-session low at 0.528%.

In parallel, the yield on German Bunds of similar maturity was off by two basis points to 0.097% and that on the equivalent US Treasury note by another two basis point as well at 1.5315%.