-
Policy
Policy
Exclusive interviews with leading policymakers that convey the true policy message that impacts markets.
LATEST FROM POLICY: -
EM Policy
EM Policy
Exclusive interviews with leading policymakers that convey the true policy message that impacts markets.
LATEST FROM EM POLICY: -
G10 Markets
G10 Markets
Real-time insight on key fixed income and fx markets.
Launch MNI PodcastsFixed IncomeFI Markets AnalysisCentral Bank PreviewsFI PiFixed Income Technical AnalysisUS$ Credit Supply PipelineGilt Week AheadGlobal IssuanceEurozoneUKUSDeep DiveGlobal Issuance CalendarsEZ/UK Bond Auction CalendarEZ/UK T-bill Auction CalendarUS Treasury Auction CalendarPolitical RiskMNI Political Risk AnalysisMNI Political Risk - US Daily BriefMNI Political Risk - The week AheadElection Previews -
Emerging Markets
Emerging Markets
Real-time insight of emerging markets in CEMEA, Asia and LatAm region
-
Commodities
-
Credit
Credit
Real time insight of credit markets
-
Data
-
Global Macro
Global Macro
Actionable insight on monetary policy, balance sheet and inflation with focus on global issuance. Analysis on key political risk impacting the global markets.
Global MacroDM Central Bank PreviewsDM Central Bank ReviewsEM Central Bank PreviewsEM Central Bank ReviewsBalance Sheet AnalysisData AnalysisEurozone DataUK DataUS DataAPAC DataInflation InsightEmployment InsightGlobal IssuanceEurozoneUKUSDeep DiveGlobal Issuance Calendars EZ/UK Bond Auction Calendar EZ/UK T-bill Auction Calendar US Treasury Auction Calendar Global Macro Weekly -
About Us
To read the full story
Sign up now for free trial access to this content.
Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Real-time Actionable Insight
Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.
Free AccessMNI INTERVIEW: Strong Case For BOE Gilt Sales At 1%-NIESR
The Bank of England is likely to launch into active gilt sales as soon as Bank Rate reaches 1% but is unlikely to allow the Debt Management Office to run the process, a new deputy director at the National Institute of Economic and Social Research told MNI, arguing that there is a strong case for the BOE to reduce the size of its balance sheet.
The BOE’s guidance allows for it to decide whether to sell gilts “depending on economic circumstances” when Bank Rate, currently at 0.5%, hits 1%, but Stephen Millard, a former senior BOE research manager before moving to NIESR to take charge of macroeconomics, modelling and forecasting, said there should be no reason for delay once the threshold is reached, assuming markets are not stressed.
"As long as there wouldn't be any adverse financial market reaction I am sure that they will do it," Millard said in an interview
The BOE, which has talked extensively with representatives of commercial banks, has a clear incentive to reduce its balance sheet, he said.
BANKS HAVE TOO MANY RESERVES
“It is fairly clear that the Bank of England's balance sheet needs to shrink … because on the other side banks are being forced to hold a lot of reserves. They are holding much more in terms of reserves than they would want to,” Millard said.
The desired level of reserves seems to be way below the GBP895 billion created through asset purchases. While the Bank’s markets head Andrew Hauser floated a GBP400 billion figure in the days before Covid, it is not clear whether the Monetary Policy Committee will reveal its view of an equilibrium point for reserves, or whether it will just announce near-term sales plans.
"That is a very difficult question. My gut feeling, as always, is that you should absolutely be transparent. in what you are doing. So, if you have a figure in mind then say what that figure is. If you are very uncertain about what that figure is say you are very uncertain about what that figure is and that you will go carefully to get there," Millard said.
"Maybe the way to do this is for the MPC [to say] this level of gilt holdings is where we think the right place … is for monetary policy. We will allow our markets people and DMO to work out how quickly we get down to that,” he said. In this case, the pace of gilt sales would become “technical details that they will handle.”
But, he added: "The counter is that what they wouldn't want to do is to say 'We are going to do this amount of sales and the markets just think 'that is too much to take'."
COORDINATION
The prospect of both the Bank and the DMO seeking to sell substantial amounts of gilts into the market at the same time has led to suggestions that the BOE could allow the government to handle the process. But Millard saw anything beyond coordination as unlikely.
“I can't see that happening. You could do that, but I don't think the Bank will want to … that would look very much as if they are no longer setting monetary policy independently," Millard said.
To read the full story
Sign up now for free trial access to this content.
Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.