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[Asia Economy Reporter Park Byung-hee] The Bank of England (BOE), the central bank of the United Kingdom, will begin selling corporate bonds it holds through auctions starting next month. This marks the start of quantitative tightening aimed at reducing its asset holdings.
According to major foreign media on the 18th (local time), the BOE announced that it will sell approximately 200 million pounds (about 318.2 billion KRW) worth of corporate bonds weekly starting next month.
The BOE stated that, as currently expected, auctions for corporate bond sales will be held twice a week, every Tuesday and Wednesday, starting from the third week of September (from September 19). Additionally, companies will be able to repurchase corporate bonds held by the BOE starting October 17.
So far, the BOE has purchased nearly 20 billion pounds worth of investment-grade non-financial corporate bonds through quantitative easing. The BOE also holds pound-denominated corporate bonds from Apple, EDF, and Volkswagen.
The BOE announced that only bonds maturing after April 6, 2024, will be subject to auction. It also explained that the sale of corporate bonds will be conducted gradually to avoid impacting the bond market and will be adjusted according to market conditions.
In February, the BOE requested bank officials to prepare a plan to complete the sale of corporate bonds by the end of 2023. In May, it announced that the target completion date for the sales had been moved to early 2024.
Separately from corporate bond sales, the BOE is also expected to reduce its holdings of government bonds starting in September. Earlier this month, the BOE announced that it plans to reduce government bonds by about 80 billion pounds over one year starting in September by selling 10 billion pounds worth of government bonds quarterly and not reinvesting the proceeds from maturing government bonds. Andrew Bailey, Governor of the BOE, also stated last month that the BOE is considering starting quantitative tightening to reduce government bond holdings by approximately 50 billion to 100 billion pounds over one year.
Currently, the BOE's government bond holdings amount to about 844 billion pounds.
Specific details regarding government bond sales are expected to be discussed at the monetary policy meeting on the 15th of next month.
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