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More 10s30s Flattening Today? (2/2)

GILTS
  • In Q1-25, the BOE will instead aim to reduce the balance sheet more equally in initial proceeds terms. This means both reducing the size of the long-dated gilt sales operations, and also reducing the relative number of long-dated gilt sales operations.
  • So in the quarter there will be four GBP800mln short-dated operations, four GBP750mln medium-dated operations and three GBP650mln long-dated operations.
  • Hence, rather than the aim of equal sales of GBP2.68bln per maturity bucket across the quarter as in Q4-24 (for a total of GBP8.04bln). On Q1-25, there will be sales of GBP3.2bln shorts, GBP3.0bln mediums and GBP1.95bln longs (for a total of GBP8.15bln).
  • This announcement saw a flattening of the 10s30s curve from 48.3bp to around 46.7bp by the gilt close on Friday but the MNI Markets team thinks there could be further flattening in early trading this morning as the market fully digests the reduced supply at the long-end. Furthermore, the Bank noted this was not a change just for this quarter - but a similar process for setting sales operations sizes would be seen across future quarters.
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