MNI INTERVIEW: Active QT Needs Coordination With Debt Managers

Global central banks will need to coordinate closely with their national debt managers on operational issues if they undertake quantitative tightening by actively selling bonds, UK Debt Management Office head Robert Stheeman told MNI.

"The markets can deal with two big sellers, but they need confidence in the coordination of scheduling," Stheeman said in an interview on the sidelines of an Association for Financial Markets in Europe conference in Brussels.

While the BOE and the DMO have closely coordinated communication over their sale programmes, both have remained operationally independent, so the Bank's active QT programme has had no impact on the DMO's auction calendar, Stheeman said.

"VESTED INTEREST" IN COORDINATION

"Both of us have coordinated closely to smooth a number of operational issues -- mainly to help communicate to the market," he said. While both institutions have different mandates for debt sales, that does not "impact the vested interest in coordination."

"We have no prior knowledge of exactly what the Monetary Policy Committee is going to do," Stheeman said, though he added that BOE staff give the DMO a steer on how the Bank would conduct its bond sales in different policy scenarios.

"Markets now need to deal with much larger net supply," he added. "But the more predictable we are, the less of an uncertainty premium the market prices in.” (See MNI INTERVIEW: Big Central Bank Balance Sheets Here To Stay)

With markets awaiting next week's Autumn Statement from the UK government, Stheeman said recent volatility in global markets was unlikely to affect the make-up of the DMO's sale remit.

Still, he noted: "Volatility can impact across the yield curve.”