The outstanding level of the reserves fell by dollars 51m in November to dollars 42.1bn at the end of the month, Treasury figures showed. The main reason for the better underlying figure was that dollars 146m more Ecu treasury bills matured in November than were issued.
Analysts said the reserves could drop sharply in December, as the Government pays off money it borrowed from other European central banks to finance support- buying of the pound. But these borrowings could be rolled over.
The market showed no reaction to the reserves data, despite having expected a big fall - the figures are regarded as easily manipulable by the authorities. The Treasury's internal monthly monetary assessment contains a more candid view of the state of the reserves. But the version soon to be published under the Chancellor's policy of greater openness in policy-making will have this removed because it is market-sensitive.
The pound, seen as a safe haven from the exchange rate mechanism, rose by 0.6 points yesterday to 79.5 per cent of its 1985 value. It rose 0.88 pfennigs to DM2.4335.
The Bank of England auctioned pounds 2.5bn of 10-year gilt-edged government securities. The issue was covered 1.26 times and the lowest accepted price gave a yield of 8.48 per cent.
Gilts analysts said foreign investors had shown little interest. The Government may face difficulties funding the ballooning shortfall between its spending and tax revenue if this continues. The Treasury forecast in the Autumn Statement that it would need to borrow almost pounds 45bn next year.
(Graph omitted)Reuse content