Investors bought £750m of bonds from the Bank of England on the first day of an auction that forms part of its slow unwinding of quantitative easing.
The Bank intends to sell £6bn of gilts across eight such auctions in November and December, the start of offloading its QE stockpile of £838bn.
Its plan is to reduce its gilt holdings by £80bn over 12 months through a mix of sales and not reinvesting money from maturing gilts.
The Bank is the first among major economies to start outright sales of government bonds, in part because of the long average maturity of its holdings, compared to those held by central banks in the United States and Canada, Reuters reported.
At its September 2022 meeting, the Monetary Policy Committee voted to begin sales of UK government bonds, but on 28 September the Bank postponed the start of these gilt sale operations, amid market turmoil following Liz Truss's disastrous Budget.
For Q4 2022, these gilt sales will be distributed evenly across the short and medium maturities only.
These are defined as: gilts with a residual maturity of between 3-7 years (short), and those with a residual maturity of between 7-20 years (medium).
The maturity split of gilt sales for subsequent quarters will be considered ahead of Q1 2023.
Market reaction to the auction result was muted. Benchmark five-year gilt yields held broadly steady at 3.56%, 4 basis points down on the day and little changed from their level before the auction, according to Reuters data.
Investors bid for 3.26 times the £750m pounds of gilts with a remaining maturity of three to seven years which the BoE put up for sale.
