Government borrowing costs are likely to rise when the Bank of England starts unwinding quantitative easing, the chief executive of the Debt Management Office has said in comments that raise questions about the sustainability of Britain’s high national debt.
Sir Robert Stheeman told MPs that once the Bank began selling the gilts it held through QE, “then clearly in terms of the overall market you would have two sellers” and “that probably would have an impact on yields”.
Well, yes, if the BoE’s stock of QE gilts is sold into the market then interest rates will rise.
The usefulness of this information being. We can’t claim that the market wants more gilts – because, look, see, low price! – when the BoE owns £725 billion of them. A distorted market price isn’t a useful guide to supply and demand, d’ye see?