The Bank of England is reported to be preparing to pause the sale of long-dated government bonds before UK Chancellor of the Exchequer Jeremy Hunt releases his first Budget on October 28. According to The Daily Telegraph, the central bank plans to stop offloading the 20- and 30-year gilts it accumulated during the previous financial crisis, in order to ease the pressure on the Treasury caused by rising borrowing costs.
The key behind this is the scale of fiscal losses. Economists estimate that since the sale of these long-term debts began in 2022, it has already cost UK taxpayers around £22 billion. Against the backdrop of global bond sell-offs, halting this discount-driven selling could save the Treasury about £2.5 billion per year, giving the newly appointed chancellor some policy room to manoeuvre, even though it also makes the budget rules for balancing day-to-day spending more complicated.
From a traditional macro market perspective, adjustments to the pace of central bank balance-sheet shrinkage directly affect the supply-and-demand dynamics in the bond market. Pausing the sale of long-dated gilts can help temporarily relieve upward pressure on long-end yields and, to some extent, stabilize market sentiment toward the UK’s sovereign credit. It may also lead to minor tweaks in the liquidity tug-of-war between the US dollar and the pound.
For the crypto market, this reflects the real trade-offs major central banks face between tightening liquidity and their ability to bear fiscal strain. While this does not mean a full pivot to easing, reduced pressure from long-end selling may slightly ease the overall liquidity environment. Crypto investors can continue to monitor how sovereign bond markets in major economies react, and to view structural changes in liquidity conditions rationally. $BTC
#BankOfEngland #Bonds #MacroEconomy
The key behind this is the scale of fiscal losses. Economists estimate that since the sale of these long-term debts began in 2022, it has already cost UK taxpayers around £22 billion. Against the backdrop of global bond sell-offs, halting this discount-driven selling could save the Treasury about £2.5 billion per year, giving the newly appointed chancellor some policy room to manoeuvre, even though it also makes the budget rules for balancing day-to-day spending more complicated.
From a traditional macro market perspective, adjustments to the pace of central bank balance-sheet shrinkage directly affect the supply-and-demand dynamics in the bond market. Pausing the sale of long-dated gilts can help temporarily relieve upward pressure on long-end yields and, to some extent, stabilize market sentiment toward the UK’s sovereign credit. It may also lead to minor tweaks in the liquidity tug-of-war between the US dollar and the pound.
For the crypto market, this reflects the real trade-offs major central banks face between tightening liquidity and their ability to bear fiscal strain. While this does not mean a full pivot to easing, reduced pressure from long-end selling may slightly ease the overall liquidity environment. Crypto investors can continue to monitor how sovereign bond markets in major economies react, and to view structural changes in liquidity conditions rationally. $BTC
#BankOfEngland #Bonds #MacroEconomy