BoE says new gilt buybacks to focus on shorter maturities

LONDON (Reuters) - The Bank of England said on Thursday that it was shortening the average maturity of gilts that it purchases as part of its extended quantitative easing purchases to avoid frictions in the gilt market.

The BoE said it would hold three weekly buybacks, one of 3-7 year gilts, one of 7-15 year gilts and one of gilts with a maturity of more than 15 years. Each reverse auction would initially have a volume of 1.5 billion pounds.

Previously the BoE had bought gilts in blocks of 3-10 years, 10-25 years and more than 25 years, with a volume of around 1.7 billion pounds each.

"This operational change is intended to help reduce the risk of undesirable frictions in the functioning of the gilt market arising from the concentration of the Bank's holding of gilts in certain maturity sectors," the BoE said.

Earlier on Thursday the BoE as expected expanded its target for quantitative easing asset purchases to 325 billion pounds from 275 billion pounds.

(Reporting by David Milliken)