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Now come the losses

This all seems entirely fair:

Taxpayers face a £167 billion bill from the Bank of England caused by losses from its multibillion-pound bond- buying programme that started in the financial crisis.

It’s not all going to be crystallised, of course. Because they’re not going to sell off all the bonds. Even if they entirely and wholly end QE, at least some of it will come from allowing bonds to mature then not reinvesting. While that may still have the same opportunity cost plus realise loss it’s not necessary for the opportunity cost to be paid for. Bonds held to maturity don’t have to be marked to market after all.

We should add that for the total calculation we need capital value plus any differences in interest payments.

But why is this fair?

Until recently, the Bank was giving this money back to the Treasury — £124 billion in total. But the payments are now starting to be reversed as the Bank sells the gilts and starts to crystallise losses.

You get the profits, you also get the losses. Seems fair.

1 thought on “Now come the losses”

  1. Why is BoE acting in its own interest?

    Why not make markets in inflation-linked bonds to set breakevens wherever they want?

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