BoE Mann: UK inflation expectations are not de-anchored

Bank of England policymaker Catherine Mann has said that UK inflation expectations are not de-anchored, has some concerns about medium-term upward drift.

The Bank of England reaffirmed on Monday its willingness to buy up to 5 billion pounds ($5.65 billion) of long-dated bonds at each of its daily auctions, after rejecting almost all offers earlier in the day.

On Sept. 28, the BoE launched a programme to potentially buy up to 65 billion pounds of gilts with a maturity of 20 years in a series of operations running until Oct. 14, in a bid to tame soaring yields which threatened financial market stability.

The announcement itself led to an immediate decline in 30-year bond yields, which fell to around 4% from a 20-year high above 5%.

However, the purchase programme has seen only low amounts of gilts offered to the BoE – in contrast to operations under its previous quantitative easing programmes and even fewer gilts have been bought by the central bank, which has rejected offers it deems too high.

In the four operations since Sept. 28, the BoE has bought less than 3.7 billion pounds of gilts so far compared with 20 billion pounds it might have, and has been offered under 8 billion pounds of bonds.

The BoE bought just 22.1 million pounds of gilts out of 1.9 billion pounds which were offered on Monday.

Gilt prices fell sharply afterwards, and 30-year yields jumped more than 30 basis points after the result was published just after 1345 GMT, rising from 3.65% to 3.97%.