The Bank will participate in the secondary market by holding reverse auction operations. The Bank initially intends to continue to hold three purchase operations a week, on Tuesdays, Wednesdays and Thursdays. The Bank will structure each auction around bonds issued by firms from certain sectors and will include each eligible security from those sectors in an auction at least once a week.
The Bank reserves the right to modify the structure of its purchase operations or to carry out secondary market purchases via other methods, such as bilateral purchases, should it be deemed necessary.
As in previous CBPS programmes, the MPC will keep under review the case for participating in the primary market.
Size of operations
The Bank will look to purchase, via the CBPS, at least an additional £10 billion of corporate bonds, taking the stock of purchased corporate bonds to at least £20 billion. The purchase pace will, over time, be consistent with this target but may fluctuate depending on seasonality, market conditions and the pattern of offers received in operations.
In each purchase operation, the Bank will initially stand ready to purchase up to £20 million nominal of each bond.
Operational Mechanism – Transaction process
In its auctions, the Bank will seek offers as a spread to a specified reference gilt. Offers will be allocated on a uniform spread basis so that all successful transactions for any individual bond will be allotted at the same single spread. In a uniform format every successful offer is allocated at the highest accepted price for that bond. Offers at the clearing spread may be pro-rated. The Bank will reserve the right to reject any offers, for any reason, including in the light of other offers received.
The Bank will, for each security, privately set a minimum spread to the yield on a specified reference gilt. It will not purchase securities at offers below this spread.
Successful offers above the Bank’s minimum spread will be allocated based on their attractiveness across bonds within each auction until the quantity that the Bank is willing to purchase has been reached.
In order to ensure purchases are representative of issuance, the Bank will adjust the minimum spread it sets in order to increase or decrease the pace of purchase.
Operational Mechanism – Submission of offers
The Bank will announce on its wire services page (see Reuters BOE/Markets1; Bloomberg BOEO 1) and on the Bank’s website each Friday at 16.00 the list of eligible securities for which the Bank will invite offers during the following week’s operations, along with the reference gilt for each security.
The list of eligible securities, along with the reference gilt for each security, will be published on the Bank’s wire services pages, and on the Bank’s website, on the day of the auction at 9:00.
Offers should be submitted using Btender between 11.00 and 11.30.
Offers must be expressed as the basis point spread to the relevant reference gilt, in increments of whole basis points. The minimum offer size for an individual security is £1 million nominal, the offer should be expressed in increments of £0.1 million nominal.
The Bank may, at its discretion, take offers submitted by phone or via email to the Bank’s Sterling dealing desk during an operation (or other means as advised by the Bank), using the phone number and email address provided to counterparties by the Bank. In this event, counterparties:
- must provide the specified ticker of the security; the nominal amount offered; and a spread to the reference gilt.
- should make no more than three offers for an individual security in a single operation and no more than fifteen offers in total in a single operation.
- submitting multiple offers across the operation should also provide the weighted average spread of those offers to 3 decimal places. That is, the sum across all offers of the nominal offer size multiplied by the spread for each offer, divided by the total nominal value of offers.
Reference gilt yields will be set for each bond as the mid-yields as published by TradeWeb, at 11:45.
The Bank will reveal to participants in Btender their allocation of offers as soon as possible following 11.45. The minimum allocation amount per successful offer is £0.1 million nominal and allocation amounts will be expressed to participants in increments of £0.1 million nominal.
The corporate bond purchases will normally settle on a T+2 basis.
The Bank reserves the right to cancel an auction at any time before the results are published. If an auction is cancelled it may be re-scheduled to take place later the same day, or on a subsequent day.
All counterparties must comply with the APF Operational Procedures, which provide more detail on the operational and settlement procedures.
As described more fully in the Terms and Conditions, the Bank retains discretion to make any amendments it sees fit in relation to the CBPS. Such amendments may be made in relation to an individual counterparty or a group of counterparties.
The Bank currently publishes the aggregate total stock of APF corporate bonds each Thursday at 15:00 on the Bank’s website and wires services.
The Bank will publish on its website the list of eligible securities for the Scheme; the representative share for each sector; and the Banks’ holdings in each of these sectors on its website on the first Thursday of the month.