David Ramsden: Bond trading, innovation and evolution - a Bank of England perspective

Speech by Sir David Ramsden, Deputy Governor for Markets and Banking of the Bank of England, at the Association for Financial Markets in Europe (AFME) Bond Trading, Innovation and Evolution Forum, London, 27 February 2024.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Introduction

Thank you to AFME for the invitation to speak at this first forum on bond trading, innovation, and evolution. Given my responsibilities at the Bank my remarks will focus on our perspective of the main themes of the forum in terms of our involvement in and engagement with these key sterling wholesale markets in the financial system. Today's conference is well timed to take stock of the evolution of the Bank's trading relationship with a core part of these markets, the market for gilts, through the MPC's quantitative tightening (QT) programme, a key element in the normalisation of our balance sheet.

The amount of gilts held in the Bank's Asset Purchase Facility (APF) on behalf of the MPC reached a peak of £875 billion in early 2022 and has since fallen back to £735 billion. As a share of outstanding government debt, the share has fallen from 35% to 31%.

At the same time, understanding and supporting continuing innovation in the settlement infrastructure on which all financial markets rely, both as an enabler and an encourager, is a key element in delivering monetary and financial stability. And this now too is a good time to update on how the Bank's approach is evolving.

A brief history of the Bank's involvement in bond markets

To frame where we stand today, I'd like to start with some history. The Bank can track its connection to bond markets all the way back to its incorporation in 1694. The Bank came into being with the specific purpose of raising funds for England's war effort against France. To help raise funds, the government created a new joint-stock company, where investors were effectively purchasing government debt to become shareholders in the company. That company was the Bank of England and so began the 330 years, and counting, relationship between the Bank and bond markets.