MercoPress. South Atlantic News Agency

Bank of England to continue buying corporate bonds but with Treasury bills

Chancellor Alistair Darling

The Bank of England will continue to buy up corporate bonds despite calling a halt to its Quantitative Easing programme, it has emerged. George Trefgarne from the Centre for Policy Studies highlighted the development in an interview with Sky's Jeff Randall Live programme.

“An interesting thing that's happened this evening which hasn't been really reported is that there's been an exchange of letters between the chancellor and the chairman of the Treasury Select Committee John McFall in which he said that the Bank of England's going to go on buying private assets, which is to say commercial bonds on behalf of the Treasury.”

In the letter to John McFall, Alistair Darling said that the purchase of “commercial paper, corporate bonds and secured commercial paper” will continue.

The move means that although the Bank has halted its policy of buying up Government bonds it will continue to purchase company bonds on behalf of the Treasury.

The letter goes on to explain that the purchases will no longer be financed by Bank of England reserves instead the money will be raised by the sale of Treasury Bills.

The news is likely to help calm fears that continued economic problems will stop businesses from being able to borrow money on the financial markets.

The Quantitative Easing programme, launched last March, was unprecedented in the Bank's 300-year history, and is aimed to help to pull the economy out of recession.