In an unexpected move, the Bank of England increased its long-dated, temporary gilt market buy program's daily maximum limit from GBP5 billion to GBP10 billion for the remainder of the week. The UK central bank will introduce a Temporary Expanded Collateral Repo Facility (TECRF) to assist banks in relieving pressure on their LDI clients in an effort to "promote an orderly closure of its purchasing plan" and increase the amount of this week's auctions. The BoE will additionally "stand ready" to facilitate the further easing of the liquidity difficulties experienced by LDI funds through its routine Indexed Long Term Repo operations.
Additionally, the BoE will "stand ready" to assist in further relieving the liquidity difficulties that LDI funds are now experiencing through its routine Indexed Long Term Repo operations. In other words, the BoE is providing the market with an excessive quantity of liquidity before the end of the gilt purchase program on Friday.
Despite the central bank mopping up bonds at specific levels over the past week, UK long-dated bond rates have been slowly rising. So yet, the BoE has only purchased bonds worth about GBP5 billion.
57.12% of traders are net long, according to data from retail traders, with a long-to-short ratio of 1.33 to 1. Traders who are net-long are up 2.77% from yesterday and up 4.19% from the previous week, while those who are net-short are up 5.44% from yesterday and down 6.99% from the previous week.
The fact that traders are net-long signals that GBP/USD prices may continue to decrease. We normally take a contrarian stance against the general consensus. More net-long than last week, but less net-long than yesterday, is the positioning. We see a further mixed trading inclination for the GBP/USD due to the present attitude and previous movements.
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