Even before the Bank of England’s bond-buying program got properly under way, it was already having an impact on the bond market.
At the beginning of August, the Bank’s governor, Mark Carney, unveiled the new program, which follows in the footsteps of the multi-billion euro action beign taken by the European Central Bank. Like Mario Draghi, president of the ECB, Mr. Carney wants to intervene in the bond market to lower capital costs for companies.
In doing so, he hopes to promote lending and boost economic growth, seen as threatened by the result of June’s Brexit decision. The reaction from a number of companies was swift: They immediately increased issuance of sterling-denominated bonds.
“Since then, we’ve seen new issues with a volume of around £12 billion ($15.6 billion),” said Philip Payne, a bond fund manager with Henderson Global Investors in London. This was a good sign for the bond-buying program from the Bank of England, or BoE. An increased supply of corporate bonds could help limit the market distortion that experts fear may result from the bank’s injection of demand into the bond market.