Sterling Slips as Cracks Spread Across UK Labor Market - Moby THE GIST The U.K. labor market just handed the Bank of England a permission slip. Unemployment rose to 5.2% and wage growth eased, pushing sterling lower and gilt yields down as markets leaned harder into rate cut expectations. WHAT HAPPENED Fresh U.K. data showed a softer jobs and pay backdrop, and markets moved quickly. Unemployment rose to 5.2% in the three months to December, up from 5.1% previously and the highest reading in about five y ...

Core Insights - The report discusses the Bank of England's Asset Purchase Facility (APF) operations for Q3 2025, including cash flow dynamics with HM Treasury and estimated savings from government debt issuance due to quantitative easing [1][7][20] Gilt Purchases and Sales - The average daily value of gilts lent by the APF to the Debt Management Office (DMO) was £8.0 billion during Q3 2025 [2] - The Monetary Policy Committee (MPC) decided to reduce the stock of gilts held in the APF by £70 billion from October 2025 to September 2026, with a specific sales strategy for different maturity sectors [4][14] - As of September 24, 2025, the stock of gilts held for monetary policy purposes was £558 billion, following a reduction of £3.6 billion from sales and £28.3 billion from maturities during Q3 2025 [5] Cash Flow Dynamics - The APF generated positive net cash flows to HM Treasury, peaking at £123.9 billion by the end of September 2022 [7] - Regular transfers from HM Treasury to the APF began in October 2022, with ongoing quarterly payments [8] - Future cash flows are uncertain and sensitive to changes in the Bank Rate, which affects interest payments and gilt sale prices [10][11] Projections and Scenarios - Illustrative projections indicate that cumulative cash flows could fall between -£60 billion and -£120 billion, with fiscal savings from lower government debt issuance costs estimated at £50 billion to £125 billion [13][20] - The stock of gilts is expected to reduce by £70 billion annually, potentially leading to full unwinding by the end of 2031 [23] - Different scenarios for the pace of unwind show varying impacts on net present value (NPV), with cumulative cash flows projected to decline significantly under various assumptions [17][18]