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MNI View: Unlikely to see much takeup in gilt purchase ops over coming days

BOE
  • So the BOE effectively clarifying here that they take the market mid-yield at the end of the auction and then add a spread to it. That spread is not disclosed to the market.
  • It looks to us as though that spread was smaller in the operations last week than in the operation on Monday (we have no data for yesterday as all offers were rejected).
  • That makes sense to us - at first the smaller spread helped to stabilise the market and then as the market looks less fragile the spread can be widened so the Bank can go to a more "backstop" type of role.
  • So unless we get more stress in the market, it appears as though the Bank's operations are going to continue to see very low takeup over the next few days at least.
  • It might be more interesting to see how operations go at the end of next week as the operations draw to a close to see if there is any more demand to sell before the Bank exits the market (the last operation is due Friday 14 October).
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