The Bank of England (BoE) surprisingly publicized today that it would increase from a daily maximum limit of GBP5 billion to GBP10 billion its longstanding, temporary, gilt market sale program for the rest of the week.
The UK central bank will utilize unused capacity to increase the size of this week’s auctions to assist an orderly end of its purchase scheme. The central bank will also commence a Temporary Expanded Collateral Repo Facility (TECRF) to aid banks in reducing pressures facing their LDI clients.
Furthermore, the Bank of England (BoE) will also stand ready through its regular Indexed Long-term Repo operations to assist in easing liquidity pressures facing LDI funds. It means that the BoE is offering excessive amounts of liquidity to the market in anticipation of the gilt buying program on Friday.
UK longstanding bond yields have been creeping higher over the last week despite the central bank mopping up bonds at certain levels.