However, by September 17th, the Bank of England had completed the purchase of £147bn of government gilts. By contrast commercial paper and corporate bonds account for just £1.8bn.
Asset Purchase facility at the Bank of England.
The Bank of England now owns 20% of the outstanding stock of nominal gilts.
It means, in recent months, the Bank of England has become the main buyer of government debt. Raising concerns that if the Bank of England stopped buying gilts or had to reverse its policy of quantitative easing - by selling gilts on open market, the government would face difficulty in selling sufficient bonds and gilts to finance its budget deficit.
Some market analysts suggest it is not as bad as it looks.
- Markets are taking advantage of the Bank of England to sell now whilst price is rising. If bank starts to sell its gilts, banks will probably be able to buy back at a profit.
There is also concerns about whether the purchase of gilts from banks is actually affecting the economy. In August M4 money supply growth was only 3%, -the lowest since 1999. This has led some to suggest the main beneficiary of quantitative easing is not increasing economic activity but financing government spending and government debt.
There is pressure on the Bank of England to use its asset purchase facility to buy more private sector bonds and try target private enterprise.