The Bank of England will start unwinding recent gilt purchases by the end of November, it said in a news release.
The £65 billion ($74.8 billion) long-dated gilts emergency purchase program was triggered by a budget proposal from former prime minister Liz Truss, which included unfunded tax cuts and an energy price cap. That led to plummeting gilt prices and huge collateral calls on LDI programs using derivatives to hedge interest-rate exposures.
The Bank of England added the temporary gilt-buying program on Sept. 28 to enable LDI funds to address risks to their resilience from volatility.
Between Sept. 28 and Oct. 14, it bought government bonds worth £19.3 billion, it said in the Thursday release, including £12.1 billion of long-dated conventional gilts and £7.2 billion of index-linked gilts.
Recent market conditions have made unwinding the temporary program appropriate, and gilts will be made available starting Nov. 29, the Bank of England release said.
The central bank did not commit to a time frame, saying instead that "there will be instances when the Bank could sell a larger volume of bonds if demand is particularly strong" but also times when it will sell few or no bonds if there is insufficient demand. Details of the selling program will come out the week of Nov. 21.
The bank's announcement "demonstrates the renewed strength of gilt markets as confidence in political and fiscal leadership appears to be returning," said Steve Hodder, partner at U.K. consultant Lane Clark & Peacock, in an email.
The next date to watch is Nov. 17, when prime minister Rishi Sunak is expected to release a budget. "All eyes are on the 17 November Budget and whether this continues to permit a stable and well-functioning gilt market," Mr. Hodder said.