Mervyn King is more than keeping up on Gilt purchases

Sir Mervyn King was bullish about the Bank of England’s ability to step up its asset purchase programme today, even though the Bank’s official inflation forecast indicated that no more Quantitative Easing might be needed beyond the £325bn already committed.

The Governor’s confidence was based, in part, on the fact that so many new Gilts are being churned out by the Government’s Debt Management Office, with the UK government needing to raise around £165bn in 2012 alone.

Joked the Governor:

“We’re hardly managing to keep up with the stuff that’s being issued!”

Actually, though, that’s simply not true. This chart, courtesy of  RBC Capital Markets, shows that the Bank is taking more Gilts out of the market each month than the Debt Management Office is putting in:

This massive role being played by the Bank in the market is the reason why some analysts are expecting Gilt yields to edge up when the QE programme does finally come to an end.

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