Bank of England corporate bond buying details unveiled

Jake Cordell
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Bank of England building on Threadneedle Street
The Bank of England is to buy "up to" £10bn worth of corporate debt (Source: Getty)

Electricity companies are set to be big winners from the Bank of England's upcoming corporate bond buying programme, according to official documents published this afternoon.

Threadneedle Street has unveiled the details of its £10bn money-printing programme which will see it buy high-quality company bonds, with one-quarter set to be channelled to electricity companies such as EDF and the National Grid.

The programme will get underway on 27 September and last for 18 months. Hermes chief economist Neil Williams said the purchases were "likely to be spread quite thinly" and raised doubts about how effective the programme would be.

In order to qualify to have bonds bought by the Bank, companies will need to "make a material contribution to economic activity in the UK" and issue investment-grade, the least risky, debt denominated in sterling.

Read more: Will Mark Carney's corporate bond buying work?

Announcing a few more details, the Bank said today companies "with a genuine business in the UK will normally be regarded as meeting this requirement." Businesses that also generate "significant revenues in the UK, serve a large number of customers in the UK or have operating sites in the UK", will also be included, regardless of where their corporate headquarters is located.

The Bank hopes by printing more money it will encourage firms to borrow in sterling, thus supporting London's financial markets, reduce borrowing costs for firms across the board and push investors into riskier assets.

A total of 110 companies and £110bn worth of debt are eligible for the programme, the Bank has stated. The list includes UK stalwarts such as BAE Systems, BT, Vodafone and GlaxoSmithKline, along with the world's biggest international companies including Apple, McDonald's and Walmart.

The corporate bond purchases were just one of four separate monetary policy decisions undertaken by the Bank at the beginning of August in its efforts to prop up the economy in the wake of the EU referendum. It also slashed interest rates to 0.25 per cent, announced another £60bn of government bond purchases and committed to print £100bn worth of cash to fund cheap loans from banks.

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