The Bank of England flexed its muscles in the bond market today, sending prices down and easing the pressure on the scramble for yield.
In its final bond-buying mission of the week, the Bank bought £1.17bn worth of medium-term government debt and found more than three times the number of willing sellers as it needed. The successful auction follows a mini-setback in yesterday's bond-buying spree which rattled financial markets and prompted analysts to raise concerns about whether Carney's £70bn stimulus package was overshooting its mark.
Today's so-called "reverse gilt auction" – where the bank asks bond holders willing to sell to step forward and name their price – received offers to part with £3.6bn worth of government bonds, giving a cover ratio of 3.1, up from 2.85 last week.
The Bank's Brexit rescue package
Such strong supply helped the Bank pay slightly less than the going market rate. Yields, which move in the opposite direction to prices, climbed to 0.57 per cent on the benchmark 10-year government bond, up from 0.54 per cent yesterday.
The purchases, which the Bank funds by effectively printing cash, mean the Old Lady has now injected more than £10bn of fresh money into the economy following the EU referendum.
Threadneedle Street is planning to buy £60bn of government bonds, £10bn of corporate bonds and dish out another £100bn of newly-minted cash by offering cheap loans to banks, as part of its post-referendum rescue mission.