Market turmoil intensifies! The Bank of England may terminate its bond selling plan ahead of schedule.

Investors will closely watch the future direction of the Bank of England's bond-selling plan at this week's monetary policy meeting. The market generally expects that the recent intense volatility in financial markets may prompt central bank officials to end the plan later this year. Strategists from Bank of America and BNP Paribas are optimistic about long-term UK government bonds, predicting that the Bank of England may stop selling bonds from October. Last month, amidst global market turmoil, the Bank of England's rare decision to postpone bond auctions further strengthened this expectation. The bond sale is part of the Bank of England's efforts to gradually unwind massive economic stimulus measures since the financial crisis and pandemic. Although it is still early for Bank of England officials to provide clear guidance on the future of so-called active quantitative tightening policies, any comments from officials before the expected decision in September will be closely monitored. Strategists from Bank of America, including Agne Stengeryte, stated: "The Bank of England is closely monitoring market fragility and may gradually realize that quantitative tightening policies have had a more pronounced impact on the market." Given that bond sales may stop, they recommend buying 30-year UK government bonds and shorting corresponding interest rate swap contracts. In recent years, as demand from traditional investors like pension funds has weakened, UK 30-year government bonds have become the biggest victim of political and economic turmoil, forcing the UK Debt Management Office to unprecedentedly reduce long-term bond issuance this year to stabilize the market. Although the central bank has repeatedly emphasized that quantitative tightening has limited impact on the market, it temporarily suspended long-term bond sales in April citing "recent market volatility." Bank of England Chief Economist Huw Pill stated that this reflects a "tactical maneuver," and added that whether quantitative tightening policies will exacerbate the rise in bond yields during periods of market pressure remains a topic for discussion. The team at BNP Paribas, including Katherine Yoon, stated: "We see both the Bank of England and the Debt Management Office adapting to recent market volatility, demonstrating transparency and flexibility in taking measures to protect the government bond market from irrational international pressure." The bank is therefore optimistic about the prospects of long-term government bonds and expects the Bank of England to temporarily halt active selling this year. According to the established process, the Bank of England will announce its quantitative tightening plan from October in September. However, central bank officials have also provided guidance to investors before making such decisions in the past. Previously, policymakers reduced their balance sheet through a dual-track model of active selling and stopping reinvestment at maturity. Last year, officials voted to reduce the asset purchase tool portfolio by 100 billion (approximately $134 billion) within 12 months. Of this, 13 billion was actively sold, with the remainder achieved through bond redemptions. Before the Bank of England makes its decision later this year, the Federal Reserve has slowed down its quantitative tightening plan. In March of this year, the Fed reduced the monthly removal of US Treasury bonds from its balance sheet from $250 billion to $50 billion. Strategists from Citigroup, including Jamie Searle, stated: "The situation where UK government bonds are affected by US Treasury bond volatility will inevitably raise questions about active quantitative tightening policies, especially after September. If the Bank of England reasserts that continuous quantitative tightening policies will be dependent on market conditions, with targeted quantitative easing policies still in place, then long-term UK government bonds may receive some support."