Banks in the U.K. have taken over the majority of new government debt purchases over the last six months on waning demand from domestic and foreign investors, according to The Daily Telegraph. On Wednesday, the Bank of England reported that banks have purchased 91% of the £39.8 billion of net issuance of new gilts during the six months to April, which at £36.1 billion is more than three times the £11.4 billion of government debt scooped up by banks in the previous half year. The increase offset at drop in foreign investors’ purchases from £33.5 billion last period to just £12.4 billion in the latest report.
The data suggests to Simon Ward of Henderson Global Investors that the increase in banks’ investments is “effectively delivering the second quantitative easing stimulus” that some officials have called for. Ward linked the drop in foreign demand to a lack of capital in debt-burdened eurozone economies that had previously turned to gilts as a safe haven compared to their own countries’ debt. Meanwhile, banks likely increased holdings in part due to greater pressure from regulators to increase liquid-asset holding ratios.