(Repeats story first published on Jan. 4. No changes to text)
By Jamie McGeever and Andy Bruce
LONDON Jan 4 Britain's shock vote to leave the
European Union has yet to scare off overseas investors, who are
snapping up British government bonds at the fastest pace on
record, figures on Wednesday showed.
This suggests that foreigners have doubled down on gilts and
are taking advantage of the slide in sterling since the June 23
Brexit vote to load up on assets that are now around 20 percent
The pound's steep fall is also likely to have forced central
banks to buy more British bonds in order to stick to their
mandates and keep the sterling weighting of their foreign
exchange reserves steady, analysts said.
The BoE figures show, however, that domestic investors are
going completely the other way and selling British government
bonds at the fastest pace on record.
Overseas investors bought 15.61 billion pounds ($19
billion)of gilts in November last year, the highest for a single
month since October the year before, the BoE said.
That brought the rolling three-month total purchases up to
39.43 billion pounds, the highest since BoE records began in
1986, Reuters calculations show.
Domestic investors sold 14.61 billion pounds of gilts,
bringing the three-month rolling total sales to 67.68 billion
pounds, also the highest since 1986.
"With the currency so cheap, it looks like overseas
investors have bought heavily on a non-hedged basis," said
Antoine Bouvet, rates strategist at Mizuho Securities in London.
"The slide in sterling helped the stock market move higher,
so perhaps there was some reallocation among domestic investors
there too," he said.
Britain's benchmark FTSE 100, which derives some 70 percent
of its earnings from abroad and therefore benefits from a lower
pound, hit its highest ever closing level this week.
The Brexit shock initially sent sterling, stocks and gilt
yields tumbling, and prompted the BoE to cut interest rates to a
new low and revive its bond-buying stimulus programme.
Alan Clarke, UK and euro zone economist at Scotiabank, noted
that holdings of gilts at British insurers and pension funds
decreased markedly after they started selling gilts to the BoE
The latest BoE data showing a big drop in domestic gilt
holdings may signal a renewal of this trend, Clarke said,
reflecting the BoE expanding its gilt purchases programme by 40
billion pounds in August 2016.
By contrast, some overseas central banks and sovereign
wealth funds will have been under pressure to top up sterling
portfolios battered by the pound's post-Brexit vote plunge.
"It's a currency effect - gilts are cheaper to buy but also
a lot of these overseas investors are mandated to maintain a
certain percentage of their portfolios in sterling assets, which
means they have been compelled to buy gilts," Clarke said.
While stocks and bond yields have recovered
since last June, the pound has remained under the cosh
and was the worst-performing major currency in the world last
Britain's current account deficit is 5.9 percent of gross
domestic product, meaning Britain relies on "the kindness of
strangers", in the words of BoE governor Mark Carney, to balance
($1 = 0.8131 pounds)
(Reporting by Jamie McGeever and Andy Bruce; Editing by Tom