Major asset managers overseeing more than $1.5 trillion in assets are pressuring the Bank of England (BoE) to cease its bond sales program. They argue that these sales place unnecessary strain on Britain’s government debt while costing taxpayers tens of billions of pounds. Ten investors interviewed by Reuters had hoped the central bank would halt sales before its September 18 pledge to slow its overall runoff, which includes maturing bonds. They believe the BoE’s actions don’t go far enough and are recommending a complete halt to sales.
Britain’s long-term borrowing costs are the highest among G7 advanced economies as Finance Minister Rachel Reeves prepares for the annual budget in November. High inflation and fiscal concerns are weighing down the value of gilts (UK government bonds), while the BoE actively sells its holdings into weak UK debt markets, incurring losses. The Treasury compensates the central bank for these bond-market losses. Research indicates this arrangement now costs the government 22 billion pounds ($29.6 billion) annually.
RBC BlueBay Asset Management’s fixed income CIO Mark Dowding, who directly oversees approximately $154 billion, stated that the Bank of England is exacerbating the problem. Dowding, who doesn’t own gilts and is betting against the pound, shared his views with BoE officials before the central bank announced it would reduce the pace of gilt runoff to 70 billion pounds annually from 100 billion pounds. BNY Investments Newton’s head of mixed assets, Paul Flood, believes active quantitative tightening (QT) affects UK debt sustainability via a fiscal feedback loop of higher public sector costs and higher gilt yields.
Notably, the U.S. Federal Reserve and the European Central Bank have allowed debt to roll off their books as bonds mature. A 2024 study published by the National Bureau of Economic Research (NBER) estimated that the BoE’s active sales are raising yields by up to 70 basis points (bps), amplifying the impact of central banks ending quantitative easing since 2021. For context, RBC BlueBay Asset Management is a global fixed income specialist managing investment strategies for institutions and individuals. Columbia Threadneedle Investments is a global asset manager providing a broad range of investment solutions.
