The Bank of England’s (BoE) newly introduced quantitative easing unlikely to be a smooth one, especially the purchases of long-dated gilts. The central bank is purchasing £1.17 billion worth of short-dated securities on every Monday and Wednesday and purchasing the same amount of Gilts with maturity extending more than 15-year on every Wednesday.

On the first week of the purchase, the total purchase fell short of its target by £52 million as pension funds and insurance companies were reluctant to part away with longer-dated securities. The second auction was successful with 2.67 times the offers ratio but in that week there were fresh supplies of £1.25 billion worth of longer-dated securities. At this week’s auction, scenes were much more unpleasant.

The central bank was successful in reaching its target but the offers deteriorated to just 1.54 times of the purchase. The bank is likely to have paid a premium for the purchase above the market price. The Bank of England (BoE) could easily face troubles with their QE, especially with 14 weekly purchases still left.

In the UK government bond market, longer-dated security (40-year) yielding less than the shorter dated ones (30-year). UK's benchmark 10-year bond is trading at 0.56 percent, 30-year is trading at 1.27 percent and the 40-year is trading at 1.13 percent.