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Bo E In Record Gilt Purchase To Keep I R Down

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http://thebusinessonline.com/Stories.aspx?...2E-D07EB5AA1CEE

Bank of England

By Allister Heath

28 May 2006

THE Bank of England snapped up £36.88bn ($68.8bn, E54bn) worth of gilts from the London markets on Thursday, equivalent to the entire value of outstanding bank notes and coins in the UK.
The huge transaction was thought to be the biggest ever in the UK
and was undertaken as part of a new weekly system to ensure short-term interest rates remain stable.
Economists said this weekend that the system, intended to make sure overnight market interest rates remain in line with the Bank’s official rate, has so far been a resounding success.

Trying to beat the economic cycle? Japs have been trying to keep IR "inline" with little success.

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http://thebusinessonline.com/Stories.aspx?...2E-D07EB5AA1CEE

Bank of England

By Allister Heath

28 May 2006

THE Bank of England snapped up £36.88bn ($68.8bn, E54bn) worth of gilts from the London markets on Thursday, equivalent to the entire value of outstanding bank notes and coins in the UK.
The huge transaction was thought to be the biggest ever in the UK
and was undertaken as part of a new weekly system to ensure short-term interest rates remain stable.
Economists said this weekend that the system, intended to make sure overnight market interest rates remain in line with the Bank’s official rate, has so far been a resounding success.

Trying to beat the economic cycle? Japs have been trying to keep IR "inline" with little success.

Have I got this right? The BoE, who we know is more likely to raise than lower rates, have bought gilts that the market says are losers, based on what they themselves have said about the future direction of rates? Isn't that potentially market manipulation?

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Guest Alright Jack

Have I got this right? The BoE, who we know is more likely to raise than lower rates, have bought gilts that the market says are losers, based on what they themselves have said about the future direction of rates? Isn't that potentially market manipulation?

Oh Jesus Christ, someone shoot this guy in the head.

Of course it's f@@king market manipulation. This is what the bank exists to do!

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Economists said this weekend that the system, intended to make sure overnight market interest rates remain in line with the Bank’s official rate, has so far been a resounding success.

Does that mean they have to do it every day? <_<

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The BOE have not actually "bought" these Gilts as I understand it. Rather than they are "checked" against an account. Credit funding credit!!!!

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Guest

God bless blighty and all those who sink in her.

Maybe you should take one of those pencils out of your nose, and sign up for a mortgage. I have a nice 1 bedroom flat in Hulme overlooking the drugs rehabilitation clinic and advisory service. Only £650,532.59p.

Some of you bears would moan if the house prices went DOWN, never mind UP.

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Maybe you should take one of those pencils out of your nose, and sign up for a mortgage. I have a nice 1 bedroom flat in Hulme overlooking the drugs rehabilitation clinic and advisory service. Only £650,532.59p.

Some of you bears would moan if the house prices went DOWN, never mind UP.

Err no, not in this country anyway, not the way things are going. Better off abroad.

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Trying to beat the economic cycle? Japs have been trying to keep IR "inline" with little success.

The BoJ have carried out massive monetizations and open market operations for years, now they've decided to stop, the overnight rate is only part of the flooding process.

So they're printing money to buy these then?

No, ink is expensive, it's all done on computer ;)

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No, ink is expensive, it's all done on computer ;)

This is what I mean by checking account - the debt has not been converted until the BOE sell?

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This is what I mean by checking account - the debt has not been converted until the BOE sell?

The BoE magically grab cash out of their back pocket and buy gilts, the seller then gets the cash credited to their account thus increasing bank reserves which is then used as margin for new loans equal to whatever the fractional reserve ratio allows.

That one open market operation could create over £400b of new liquidity once the multiplier is taken into account.

the debt has not been converted until the BOE sell?

Nope, once the BoE sell this reduces the money supply as it reduces bank reserves and the fractional reserve goes into reverse.

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http://thebusinessonline.com/Stories.aspx?...2E-D07EB5AA1CEE

Bank of England

By Allister Heath

28 May 2006

THE Bank of England snapped up £36.88bn ($68.8bn, E54bn) worth of gilts from the London markets on Thursday, equivalent to the entire value of outstanding bank notes and coins in the UK.
The huge transaction was thought to be the biggest ever in the UK
and was undertaken as part of a new weekly system to ensure short-term interest rates remain stable.
Economists said this weekend that the system, intended to make sure overnight market interest rates remain in line with the Bank’s official rate, has so far been a resounding success.

Trying to beat the economic cycle? Japs have been trying to keep IR "inline" with little success.

i thought gordon lamont had a little attempt too...

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The BoE magically grab cash out of their back pocket and buy gilts, the seller then gets the cash credited to their account thus increasing bank reserves which is then used as margin for new loans equal to whatever the fractional reserve ratio allows.

That one open market operation could create over £400b of new liquidity once the multiplier is taken into account.

Nope, once the BoE sell this reduces the money supply as it reduces bank reserves and the fractional reserve goes into reverse.

Thanks for thart BB - and WOW £400b just like that.

Question though - is it CASH - they still have not printed £400b, it's just a case of transfering the debt???????

(sorry if I am slow on this one).

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Thanks for thart BB - and WOW £400b just like that.

It could be more, the BoE run a voluntary reserve ratio instead of a fixed requirement, the ratio was just 3.1% in 1998, it may be lower now due to the new open market reforms, banks no longer have to settle with each other provided they can keep within an 'average'.

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Guest muttley

From the article.

Under the new system, interest is paid on Bank of England deposits for the first time in history, which has led to a big increase in the size of reserves.

If the Banks and Building Societies are getting a deposit from the BoE, won't they be less inclined to lend to the likes of us?

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Oh Jesus Christ, someone shoot this guy in the head.

Of course it's f@@king market manipulation. This is what the bank exists to do!

Bit harsh?

So if it is market manipulation, and even a muppet like me can figure it out, why does the market not react like it did on Black Wednesday?

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Guest Bart of Darkness
Bit harsh?

No point in expecting reasonable conduct from a troll.

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Could this manipulation have been behind the recovery in the stock market ? Was Gordi trying to calm nerves that rates may rise higher and further than expected by showing that the government and BOE would do whatever it could to keep rates down ?

Sorry if this is a dumb question but I am not a banker or financial guru.

I don't fully understand what lies behind current market volatilty but it seems to be something to do with a fear of interest rates rising ?

If this truly is the case doesn't it just show how fragile or how f***ed our economies are if the threat of a 1/4 % rise in interest rates, to what would still be historically very low levels, sends the to markets into meltdown ?

Edited by Bearfacts

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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