LONDON (MNI) – Due to declines in the market value of Gilts bought
under the Bank of England’s Asset Purchase Facility, the APF’s debt
holdings showed a marked-to-market loss in the year to February 2010.
In the APF Fund’s Annual 2009/2010 Report, the Fund’s directors
noted that any losses incurred by the APF – the BOE’s vehicle for
conducting its quantitative easing programme – would be covered by a UK
Treasury Indemnity.
The indemnity due from the Treasury totaled stg1.8 billion over the
period. The APF Fund – which holds the Gilts and other instruments
bought under the BOE QE programme – is structured so that it never shows
either a loss or a surplus. Any surplus would be returned to the
Treasury.
The BOE bought stg200 billion of assets, the bulk of which was
Gilts, during the Mar 2009-Feb 2010 period.
In the report, the Fund’s directors, BOE Chief Economist Spencer
Dale and Executive Director Markets Paul Fisher note that the indemnity
should not be read as implying that QE had had a net negative
impact on the UK public finances:
“…broader factors that are not included in the Company’s
accounts, including the fact that stimulation of economic activity
resultant from the Company’s activities will raise tax receipts, and the
fact that the Company’s purchases have lowered gilt yields below where
they would otherwise be, thereby reducing the Government’s funding
costs, mean that these accounts cannot be used to draw implications for
the overall impact on the public sector’s financial position”.
–London Bureau; Tel: +44207862 7491; email: ukeditorial@marketnews.com
[TOPICS: M$B$$$,M$$BE$]
