I have been talking about huge Bank of England losses and the need to curb them for the last two years on this site. Now the Telegraph is reporting them as well, and Richard Tice has written to the Bank about them.The BBC when I last briefed them again about it told me no one reported it because they did not understand it . Let’s have another go at explaining.
After the banking crash, briefly after Brexit and extensively after the pandemic out break the Bank created money to buy up £875 bn of government bonds. They paid high prices for them.
When bond prices rise the interest rate falls and vice versa. The Bank bought the bonds to drive the prices up and the interest rates down. If the government borrows £100 for a very long time at 1% it promises to pay £1 a year interest on that £100 bond. If rates fall to o.5% the bond price rises to nearly £200 so the £1 of interest is now 0.5% of the value. If rates rise to 2% the £100 bond falls to nearly £50 so £1 of interest is 2% of value.
Now the Bank is sitting on big losses as it has put interest rates up a lot and has been selling bonds to drive their prices down. It is losing money three ways.
1. Selling depressed bonds in the market at big losses. There is no need to do this. The Bank could hold the bonds until they mature and repay at their original issue value. This is what other Central banks are doing.
2. Losing less on the bonds it holds to maturity. It is still losing on many of them which it bought above initial issue and repayment value
3 Paying more to commercial banks who deposit money with it than it gets on interest on the bonds it has bought with the money.
Tomorrow I will explore how far the Bank could go in reducing these losses.
June 9, 2025
Reply. Please do not waste your time sending general over the top denunciations of people and institutions. I am not going to publish them.
June 9, 2025
Yes, my sarcastic comment of Ms Badenoch didn’t make it to publication yesterday, so criticism of 2TK is fine but the opposition not so. So sad.
However to the issue, the BoE is a wholly owned corporation of the Treasury. ‘Repayment’ of money (bond sales) by Treasury to BoE is ….. repaying themselves! (the money repaid to the BoE is removed from circulation)
This churning of Gilts, cancelling the low yielding and issuing new higher yielding Gilts, to maintain LIQUIDITY, is pushing up the average cost of government debt, or a higher return to purchasers, making our money worth more. It is the reason foreigners buy our money and stops the £ being devalued.
Reply The policy of this site is to concentrate on government. This site recorded many criticisms of the last Conservative government and did not take comments on Labour most of the time. I do occasional pieces on Opposition parties.
June 9, 2025
@ Peter Wood – you might consider sending your explanation of what is going on with the Bank and bonds to the BBC. That would silence them for evermore!
June 9, 2025
mention bonds to the BBC and they would think its about S&M.
June 9, 2025
PS, Why my comment is relevant:
As of 16 December 2024, the total value of all outstanding gilts was £2.6 trillion. This makes up the vast majority of the UK Government’s debt. As of the second quarter of 2024, around 31%, or £635 billion, of gilts were held overseas.18 Dec 2024
This is why the BoE is scared of upsetting the Gilt market. They must also be terrified of Ms Reeves and 2TK making a pigs-ear of our economy and coming back for more money, or QE.
June 9, 2025
A non-foreigner (UK based) holder of gilts on seeing foreign holders of gilts flee would not follow them into US treasuries, JGB, other sovereign debt or any other haven then?
June 9, 2025
If foreigners lose faith in Government management of our economy there will consequent loss of confidence in £, as happened in between 1974 to 1976. If you care to read this you’ll see a worrying level of similarities of policy.
https://en.wikipedia.org/wiki/1976_sterling_crisis
June 10, 2025
@ Peter Wood – yes, you said so before. Recall though the Exchange Control Act was repealed in 1979 so non-foreigners are now able to emulate the foreigners, should they wish.
June 9, 2025
Since this appears to be a ludicrous policy, why are they doing it? Sir John failed to mention that the Chancellor has to sign off the Bank’s proposed “firesale” of Treasury Bonds.
The Bank of England’s task (which it constantly fails to deliver) is to maintain inflation at 2%. Post the scamdemic, when they’d printed approx £400 billion to fund the Tyranny, inflation took off. And the Government was desperate to get inflation back down.
It seems to me that this was an agreed joint policy of Sunak/Hunt and Bailey to reduce inflation in the short term …. with the debt can kicked down the generations. Two-Tier/Rachel from Complaints and Bailey are simply continuing the same policy.
It is another case of “Capitalise the Profits (for those who benefited from the Tyranny) and Socialise the Losses for those who didn’t.”
June 9, 2025
@ Donna ” Sir John failed to mention that the Chancellor has to sign off ….” – not today but as you will recall Sir John has repeatedly reminded us of that point. Likewise he has told us what we can also see for ourselves, that the Bank does not explain its policy, rather has made admissions that suggest it is not necessary.
Why successive chancellors have permitted the Bank to carry on in the reckless fashion it has is even less understandable
Also a complete mystery is why the BBC refrains from reporting about the bond losses just because it does not understand the issues: that limitation does not constrain it over climate change and other matters.
June 9, 2025
Yes, I acknowledge that Sir John has mentioned the culpability of the Chancellor/s in the past. I should have said “this time” in my observation above.
Sorry Sir John 🙂
June 9, 2025
If the BoE makes lossess, and doesn’t hit its inflation target, perhaps its managerial staff should get pay cuts or have contributions to their gold-plated pensions put on hold?
June 9, 2025
The BoE purposely started a run on the bonds to undermine Truss because she had a plan. Sunak was the WEF preferred candidate because he was one of them.
Now we are in a position were taxpayers money is needlessly being given to increase the retail banks profits, increasing the national debt and costing a fortune in interest payments.
Anyone think this is a cunning plan.
June 9, 2025
Yes. The IMF effectively sacked Chancellor Kwarteng and Bailey and the LibCONs then saw off Liz Truss.
The Banks are being propped up again, with taxpayer-funded debt.
June 9, 2025
Truss sank herself in one sentence uttered at the Despatch Box. Look it up ‘I will NOT cut spending’.
June 9, 2025
If you want to know what the bank really thinks look at their pension investment decisions and not just what they say. Rather like politicians you can only judge most of them by their actions.
It was mainly Sunak to blame when he was Chancellor and wanted to borrow £billions so it could be pissed down the drain on net harm lockdowns and net harm Covid vaccines. How is Sunak getting on wording his apology to the House for his “Covid Vaccines are/were “unequivocally save” drivel. Would he like to seem some statistics – they are appalling – excess deaths, arrhythmias, cardio vascular problems, reduced live births, blood clots, cancers… Yet in the US they have just authorised another MHRA spike vaccine.
June 9, 2025
I’m not sure they worry too much about the pension investment decisions. Just so long as the pension is inflation linked to final salary and years of service. Any top-up to keep the scheme solvent can simply be printed as required.
June 9, 2025
Recently a US Senator proposed an amendment which would make all members of congress ineligible to run for re-election if inflation or the deficit hit more than 3%. I would suggest extending that to other senior unelected.
June 9, 2025
Good morning.
I think this needs a little more attention, don’t you think ?
🤑
June 9, 2025
I find it inexplicable that Bailey and BoE are doing this ?
June 9, 2025
Follow the money and the vested interests.
June 9, 2025
As with the vast net harm Covid “vaccines” the Post Office scandal, net zero, HS1, HS2, various tram schemes, cross rail… The beneficiaries from mass migration are – HR lawyers, judges, hotel owners, government employed intermediary companies, so called political “consultants” with political “connections” even worse with the vast net zero con trick!
June 10, 2025
+1
June 9, 2025
I wonder if the key point here is that people “don’t understand it” ? If the BoE puts up interest rates directly (to reduce inflation) that is clear, understood, reported, and disliked as mortgage rates go up and the BoE/government gets blamed. If instead they sell these bonds back into the market it drives down their price and so bond interest rates go up but this is not clear, not understood and not reported but has some of the same effect on inflation. As you note the BoE seem to be unique in following this course, I believe the EU and USA central banks don’t do this – it would indeed be strange if the BoE have somehow hit upon a better strategy than them.
June 9, 2025
Is it not just the BBC, but the BoE too, that does not understand what it is doing?
June 9, 2025
It is reported that mr Bailey the governor has warned that a reform govt would mean higher borrowing costs for mortgages and lower rates for savers (I didn’t see the detail as to how this squares). I don’t expect a reform govt and will most likely be voting Conservative myself. But it is surely unprecedented for the BoE governor effectively to campaign against a particular political party? The role was hugely politicised by the grossly over-rated mark carney, but even he didn’t actually campaign for or against particular parties while he was governor. (He did of course campaign for Labour at the last election).
June 9, 2025
On what basis does Bailey say ‘a reform govt would mean higher borrowing costs for mortgages and lower rates for savers ‘?
Soothsayer or just unsubstantiated rubbish?
June 9, 2025
Our establishment seem to idolise the EU and the Eurozone. If the ECB can reduce the interest rates it pays to depositors and to hold bonds to maturity, why does the BOE think it knows better?
June 9, 2025
Yes, our establishment idolises the EU. At present it is having a campaign about degrading the seabed. Yet not a word about getting the devastating EU trawlers out of our waters.
June 9, 2025
The BoE, Treasury, OBR are all captured entities. They suffer Stockholm Syndrome in response to socialist brain washing. You will have to await the great reset in 2029.
June 9, 2025
Taxes from a city the size of Manchester just to pay for migrant accommodation says the Sun today. But this is not all we also have the legal and translation fees, free dentistry, health care, phones, allowances… plus we all have to pay higher hotel bills for ourselves as they are driven up and higher rents and house prices. Plus many wages are driven down or harder to find! Or we have our own house values driven down by increased crime rates or migrant hotels in the area.
How is smashing the gangs going on Starmer?
June 9, 2025
Given that you have so much in common with Richard Tice, (the best candidate Reform have for PM), how long is it going to be before you jump ship ?
Reply This is an independent site. Its not on a ship.
June 9, 2025
“Henry Hill
The Conservatives’ attack on Labour’s ‘housing blitz’ shows a party which has learned zero lessons”
But why?
June 9, 2025
You are talking huge numbers here John, as you have been for many years, quite why no one in government or opposition have made any comments in the past is beyond belief given the size of the losses, as they dwarf any other expenditure, Pleased at least Reform have now started to grasp the nettle, but news organisations still seem reluctant to publish anything at all.
June 9, 2025
The BoE’s primary function is to maintain price stability and support government economic policy
Why does it seem that they aren’t following that mandate to the letter? Why does it feel that they don’t care too much about getting inflation figures right?
Parliament scrutinises the BoE so whatever it does must be in line with what HMG requires — SO, why so many bad decisions. Is it the bank driving economic policy or HMG making the Bank follow WEF policies?
It’s all gone beyond fixing by a bit of scrutiny, there has clearly been a major management shift that cannot be excused by incompetence alone.
June 9, 2025
The Spending Review – June 11
Whatever decisions are made as regards departmental budgets it will not alter the general economic trajectory for this country which will continue to be be ever more debt, a nanny state out of control and an ever increasing tax bill.
We must surely be very soon hitting the limits of what can be sustained with an ever expanding government!
June 9, 2025
Reporters for the Welt am Sonntag have come up with an interesting scoop.
Not only do they reveal a secret computer in the bowels of Brussels that shows how operations have been funded and managed against those opposing net0 it shows just how deceitful the Commission is.
That is but one agreement made by the Commission.
Any normal government would have been forced to resign after such revelations, but the Commission has never been decent, honest or have any morals.
June 9, 2025
‘Tomorrow I will explore how far the Bank could go in reducing these losses.’ You could suggest I am splitting hairs, but if we think about it who are the managers? So, who has the responsibility?
In the 1600’s through to when in 1946 and the Labour Party Nationalised the Bank of England it was Independent. It created its own stability with its own money. It was self-function. Since then, in various guises it may have had some pseudo independents, but nothing that needs taxpayer funding is truly independent – it can’t be. As soon as Government takes money from the taxpayer the Government and Parliament become the managers, the authority in charge. Who is it that is responsible that the right team is in place at the BoE? – it is the Government of the day. So, who is it responsible for the BoE losing the taxpayers money? So, who is it responsible for ensuring the BoE doesn’t loose our money?
if proper responsibility, i.e. those that pay had in place those that manage on their behalf picking up their own empowered and paid for responsibility and it was applied across the board – we wouldn’t have half the situations that are holding the whole nation back …..
June 9, 2025
What is our Legislator, our Parliament, MPs & Government for? If it is not to take responsibility for the powers we loan them?
June 9, 2025
“Why has the Bank of England lost us so much money?”
Sir John, you’ve explained very well how the BoE is making huge losses but not the why?
June 9, 2025
All part of the WEF conspiracy to devalue Western economies with the odd concept that it therefore must increase economies of the poorer! Mad conclusion.
June 9, 2025
Possible slow demolition of the UK so something new can take its place…you hear this is the West a lot from leftist globalists.
June 9, 2025
Please press on with harrying the BoE over the issue of bond trading losses. It is a major burden on Gov’t expenditures and we have still not received an explanation from the Bank as to why it continues with this practice. But it seems as if The Telegraph might be getting interested in the subject which would be a big help.
June 9, 2025
It is a great credit to you, Sir John, that you have tirelessly raised this issue. I did not realise what was going on until you raised it in your articles. But what do we do? How do we get it on the front pages and lead item on the TV news, when the MSM, especially the BBC, just ignores it?
You would think the BOE making constant losses would be a concern to our MPs, and they would be asking questions in the HOC. Why is Andrew Baiuley still there after the mess he has made of the job?
If you tolerate mediocrity, that is what you get.
I will write to my MP, but his replies usually just repeat the party line.
Reply I talked about it on GB News last night
June 9, 2025
The BBC’s “don’t understand” comment does not surprise me.
I have seen a lot more spelling errors on the BBC website lately. They always struggle with business news as well….
June 9, 2025
“The BBC when I last briefed them again about it told me no one reported it because they did not understand it.”
Does Andrew Bailey understand it? He did history at Cambridge, not economics, and we do know that the Bank’s graduate training scheme does not seem to work very well even for Oxford PPEs.
June 9, 2025
PS : PS : The good news is that the FT report 06/06 that the Bank of England has shifted its attention away from climate and nature risk since Andrew Bailey took over as governor according to senior staff members who have resigned from working on those issues at the central bank:
https://greencentralbanking.com/2025/06/06/bank-of-england-climate-andrew-bailey-former-staff/?
We now need the Treaury to follow.
June 9, 2025
”Why has the Bank of England lost us so much money?”
Because various governments have accepted, sanctioned, welcomed, approved & authorised them and their actions
June 11, 2025
Sorry, I only read this after I made my comment on today, Wednesday’s, blog post. Please ignore it.