Bank of England plans to sell $23bn corporate bond stock

Workers are silhouetted as they walk past the Bank of England, in London, Britain August 8, 2022. REUTERS/Toby Melville

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LONDON, Aug 18 (Reuters) – The Bank of England on Thursday announced plans to auction around 200 million pounds ($241 million) of corporate bonds per week starting next month, as it is moving forward with its plan to unwind its huge recovery plan. of recent years.

The BoE bought nearly £20bn of investment grade bonds from non-financial corporations as part of its quantitative easing program to support the economy and stabilize financial markets after the 2016 Brexit referendum and during the COVID-19 pandemic.

The BoE’s monetary policy committee announced in February that it had instructed bank staff to design a program of corporate bond sales that would be completed by the end of 2023 at the earliest. The BoE said in May that it aimed to complete sales in early 2024.

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“Sales will be gradual and responsive to market conditions, in line with MPC guidance to limit disruption to the functioning of the sterling corporate bond market,” the BoE said on Thursday.

The sales of the BoE’s stock of corporate debt are separate from its plans to cut its £844bn of government bonds by £80bn over the next year, with further cuts in subsequent years .

Under the plan, the BoE will continue not to reinvest maturing gilts and will sell around £40 billion worth of gilts in the 12 months from September. Read more

The BoE’s corporate bond holdings include sterling debt from companies such as Apple (AAPL.O), EDF (EDF.PA) and Volkswagen (VOWG_p.DE).

Last year, after pressure from environmentalists, the BoE said it would use its holdings to incentivize companies to cut greenhouse gas emissions faster. Read more

The BoE said on Thursday it plans to hold a corporate bond auction every Tuesday and Wednesday starting the week beginning Sept. 19. Companies will be able to apply to buy back their own bonds directly from the BoE from October 17.

Each auction will focus on bonds in a particular industry sector, and auctions will cease during quiet market times, including December 8 through January 9.

The BoE will only auction bonds maturing on or after April 6, 2024.

The current £19.1bn of BoE corporate bonds have a face value of £14.5bn.

Excluding debt that will mature before April 2024, it has bonds with a face value of around £13bn to sell. The weekly sales target of 200 million pounds is in nominal terms.

($1 = 0.8286 pounds)

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Reporting by David Milliken and William Schomberg; Editing by Catherine Evans

Our standards: The Thomson Reuters Trust Principles.

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