Rates spark global long end gets some relief from the boe

Key arguments

• The Bank of England will retain around £120bn of the longest-maturity gilts on its balance sheet, excluding bonds maturing after 2049 from active sales.
• Active sales are paused until April 2027, and the Bank will explore transferring gilts to the UK Treasury; government-funded QT does not reduce total supply because purchases would require new issuance.
• The decision transforms the maturity profile, effectively replacing longer-dated gilts with shorter issuance, which is why 30Y gilts reacted positively.
• In France, the 10-year OAT/Bund spread at 96bp remains the widest since 2012, reflecting unease ahead of next year's presidential elections; a final 2027 budget is still pending.

Corresponding source evidence

1. For one, around £120bn gilts with the longest maturities will remain on the central bank’s balance sheet, which means bonds maturing after 2049 will not be part of the active sales. · 2049
2. But perhaps a stronger signal to markets was the decision to pause active sales until April 2027 and explore a mechanism to transfer gilts from the Bank of England to the UK government treasury. · April 2027
3. Friday’s events and market view We will get the eurozone current account for July and the European Central Bank will release results of its inflation survey, where longer-run consumer expectations are expected to have nudged up on the back of energy prices.