Brace yourself: How higher interest rates bring quantitative tapering nearer

Reducing gilts

clock • 4 min read
Grace Le is co-manager of the Artemis Corporate Bond Fund
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Grace Le is co-manager of the Artemis Corporate Bond Fund

For the past 14 years the Bank of England has been buying bonds – close to £1trn worth. But in the coming months that process is expected to be reversed.

Last week's decision to raise interest rates to 0.75% brings us closer to the point when quantitative easing becomes quantitative tapering. Should investors be concerned? Last month the BoE raised interest rates to 0.5% and unexpectedly announced it was planning to dispose of its sterling non-financial investment-grade corporate bonds - a small part of its overall holdings. The market took fright and sold off sharply. US Treasury yields rise to levels not seen since 2019 - reports At the same time the BoE said it would begin to reduce its stock of gilts by allowing them to mature. ...

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