HALISTER1: Next Long-End BOE Gilt Purchase to See ’Healthier Cover’: BofAML

Next Long-End BOE Gilt Purchase to See ’Healthier Cover’: BofAML

(Bloomberg) -- Recent uncovered BOE purchase operation in 15Y+ sector driven by a combination of usual drop in liquidity during summer period and lack of consensus for an expansion of Gilt QE going into the BoE’s August, leaving many not positioned, writes BofAML Ralf Preusser in a client note.
  • Next long-end purchase operation on Aug. 16 will be in focus; expect a “much healthier cover”, as seen in this week’s medium-dated operation
    • Low amount of offers have woken the market up to lack of natural sellers to the BOE in long end; could lead to more speculative offers being made above market prices
    • The tail on next week’s long-end reverse auction is likely to be of more interest, with a large tail signifying that BOE has paid above market rates to source the bonds
  • NOTE: Latest long-end purchase was uncovered, with offer ratio of 0.96x; BOE paid a significant premium to market prices on all bonds, led by 01/2060 issue, which was bought at an average price 103p above market prices
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Ralf Preusser (Merrill Lynch International)

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