Gilt Auction

Every tuesday Brings the reverse Auction from the BOE(QE) of long dated,15+years gilts.These bonds are in high demand  and have  been a problem for BOE to wrestle them away from holders.One way to entice them is to pay a hefty premium over the current prices and that is what BOE did. For some maturities BOE paid 200 ticks above current cash prices. At last week’s auction BOE paid 140 ticks above current prices for some maturities.

The  reverse bid to cover at today’s auction was 2.08,in line with the last 2.But what drove prices higher was the hefty premium that The BOE paid.I will monitor this metric for the next few auctions.For holders of these bonds it sounds like easy money doesn’t it?

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