Bank of England's Gilt Sales Under Fire as UK Faces Record Debt Costs
Top fund managers managing $1.5 trillion in assets urge Bank of England to halt controversial gilt sales as UK faces highest G7 borrowing costs and mounting taxpayer burden.
Bank of England headquarters in London as gilt sales controversy intensifies
Leading asset managers overseeing more than $1.5 trillion are calling for the Bank of England to cease its government bond sales program, warning that the policy is driving up Britain's borrowing costs to the highest levels among G7 nations while burdening taxpayers with billions in unnecessary expenses.
Growing Market Pressure and Economic Strain
The controversy emerges amid heightened political and economic tensions in the UK, with finance minister Rachel Reeves preparing for a crucial November budget announcement. The central bank's aggressive bond-selling strategy, known as quantitative tightening (QT), is facing mounting criticism from financial experts.
"Many investors including ourselves have been saying to the Bank of England you're making the problem worse, not better. Stop doing this," stated RBC BlueBay Asset Management's CIO Mark Dowding, who oversees approximately $154 billion in assets.
Fiscal Impact and Market Instability
The Treasury's compensation arrangement for bond-market losses is currently costing the government £22 billion annually, according to research by former BoE economist Carsten Jung. This financial burden comes at a time when Britain faces significant economic challenges and political pressure to boost growth.
Key Concerns:
- UK's long-term borrowing costs are highest among G7 economies
- The BoE's active sales are destabilizing debt markets
- Taxpayers face mounting costs from bond-market losses
- Market instability threatens broader economic stability
International Comparison and Policy Impact
While other major central banks like the US Federal Reserve and European Central Bank have opted for a more gradual approach, allowing debt to naturally mature, the BoE's aggressive sales strategy has amplified market pressures. A 2024 study by the National Bureau of Economic Research suggests the BoE's active sales have raised yields by up to 70 basis points, significantly more than the 20-basis-point impact seen in other markets.
The situation reflects broader concerns about London's financial stability and economic management, with experts warning of a "fiscal feedback loop" that could further strain public finances.
Thomas Reynolds
Correspondent for a London daily, specialist in British foreign policy and transatlantic issues.