by David Milliken
LONDON (Reuters) – The Bank of England (BoE) on Thursday presented a plan to sell corporate bonds for around 200 million pounds (237 million euros) a week from September as part of a a process of “quantitative tightening”.
The BoE bought nearly £20bn of non-financial corporate bonds to support the economy and stabilize markets after the Brexit referendum and the COVID-19 pandemic.
Its Monetary Policy Committee announced in February that it had asked central bank teams to design a program of corporate bond sales. These disposals should be completed in early 2024.
“Sales will be gradual and adjusted to market conditions, in line with instructions from the Monetary Policy Committee to limit disruption to the functioning of the sterling corporate bond market,” the BoE said in a statement.
This process is separate from the one to reduce its portfolio of government bonds by 80 billion pounds in 2023, with further reductions in subsequent years.
The UK central bank will not reinvest capital from maturing bonds and will sell around £40bn worth of UK government bonds (gilts) in the 12 months from September.
Among the corporate bonds held by the BoE are securities issued by Apple, EDF and Volkswagen.
The central bank plans to hold sales every Tuesday and Wednesday starting the week of September 19 and these operations will only concern bonds maturing no earlier than April 6, 2024. Companies wishing to buy back their own securities directly from the BoE will be able to do so from 17 October.
There will be no bond sales during quiet market periods, especially between December 8 and January 9.
(Report David Milliken and William Schomberg, French version Laetitia Volga, edited by Marc Angrand)
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