Gilts rally on Bank of England's £35bn gift to Treasury

The Bank of England is to hand the Treasury the interest it receives on its QE asset purchases, a move that reduces pressure on Chancellor George Osborne ahead of the Autumn Statement.

The BoE has purchased £375bn in gilts via its quantitative easing (QE) programme and will now hand the interest on those purchases (expected to reach £35bn by March 2013) to the Treasury on a regular basis. Gilts rallied on the news, in the expectation the extra income will make future government borrowing requirements slightly lower than previous estimates. Ten-year gilt yields fell to from 1.77% to 1.67% on the news, the lowest level since 5 October, before easing back to 1.72% by mid-afternoon. Monument Securities' Marc Ostwald said the deal reduces pressure on the Chancellor to...