The pound continues to fall as the BoE buys gilts

Quantitative easing as a new policy took its first steps yesterday as many investors looked to sell government bonds to the Bank of England.

In an unprecedented response the Bank of England had planned to spend £2bn of newly printed money although received offer to buy in excess of £10bn worth of gilts.

As a result the pound has fallen against the euro, dollar and the Yen as further losses in the stick market reduced the demand for assets that were priced in GBP.

Quantitative easing has pushed the value of longer yields and gilts yields down as the Sterling is interest-rate sensitive.

Gilts are usually seen as ultra- safe trading, although since the announcement of a dynamic policy shift to quantitative easing there has been an increased amount of activity and analysts predict that in order for the scheme to have a real effect the bank may need to double it.

The pound has fallen by 0.4 percent to 92.94 pence per euro this morning and many analysts are predicting that the pound may fall to 97 pence per euro in the next three months.

Meanwhile the U.K. Debt Management Office received bids 2.6 times more offers than they has 1.25 percent inflation-linked bonds for sale worth a total of 1.1 billion pounds which is a far cry from the last auction in January.

Story link: The pound continues to fall as the BoE buys gilts