From whom has the Bank of England been buying all the gilts?
1 Since QE began in the first quarter of 2009, the total value of gilts in issue has increased from £616 billion to £1.354 trillion [Data to 2012 Q4 The latest figures available from the Debt Management Office.]
2 The Debt management office has issued £738 billion of new gilts over the period to fund the government deficits, over half of which have been purchased by the Bank of England under the QE policy.
3 At the end of 2012, the Bank of England held gilts to the value of £397 billion. That’s almost £400 billion. The Bank of England has purchased almost £400 billion or 54% of the new gilts issued, according to the data.
4 Overseas holdings of gilts have doubled in the period, increasing from £203 billion to £420 billion, an increase of £217 billion.
5 UK holdings of gilts have increased from £400 billion to £937 billion, that is to say, UK holdings have increased in value by £523 billion.
6 The Bank of England has accounted for 76% of the UK purchases of gilts issued since the first quarter of 2009.
7 Insurance companies and pension funds have increased holdings of gilts from £228 billion to £348 billion.
8 Households have increased their holdings of gilts over the period from £13 billion to £31 billion.
9 In fact most, if not all, holders on gilts at the end of 2008, have increased the value of gilt holdings over the last four years.
10 There is some evidence of front running by some financial institutions as holdings increased ahead of the QE announcement in early 2009 but other than that holdings have increased across the board.
Which poses the question, from whom has the Bank of England been purchasing all the gilts? It would appear to some the QE policy is more concerned with mopping up the gilts issued by the DMO, at beneficial rates, than it is with stimulating growth or avoiding deflation.
If that is the case, then the Governor of the Bank of England has done a great job but hence the need to continue with QE despite the recovery in growth and inflation.
Download the DMO Data Set Here.
The Saturday Economist
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