Bank of England: Gilt Market Moves "Orderly," Says Breeden

The Bank of England (BOE) is closely monitoring the gilt market, but Deputy Governor Sarah Breeden has reassured investors that recent price moves have been "orderly." In a speech delivered in Scotland, Breeden emphasized that the BOE is keeping a close eye on the gilt market, particularly after longer-term yields have risen sharply recently. She noted that the BOE is monitoring the market because it is a core market and they care about its functioning.



Breeden's comments come amid a global trend of rising bond yields, with UK gilts mirroring the recent jump in yields seen in U.S. Treasurys and other global bonds. The BOE's focus on the gilt market aligns with its financial stability objectives, as it aims to ensure that the financial system provides vital services to households and businesses reliably in all states of the world, even when shocks hit.

The BOE's monitoring of the gilt market also has implications for its monetary policy decisions. The gilt market's performance can influence the BOE's decisions on interest rates, financial stability tools, and interventions. Breeden acknowledged that cooling inflation and signs of weakening growth suggest a gradual pace of interest rate cuts, indicating that the BOE is likely to continue lowering its key interest rate with further cuts expected in early February.

In conclusion, the BOE's monitoring of the gilt market is crucial for maintaining financial stability and informing monetary policy decisions. Breeden's reassurance that recent price moves have been orderly should provide some comfort to investors, but the BOE will continue to closely monitor the market to ensure its reliable functioning and prevent potential market dysfunction.