LONDON / RankWire.AI / – The Bank of England has set a multi-year plan to unwind its remaining monetary-policy gilt holdings by September 2034. The central bank will sell £20 billion of government bonds each year while allowing other gilts to mature. Together, sales and maturities will reduce the portfolio by an average £46 billion annually. The plan replaces the previous annual approach to quantitative tightening and provides a defined path for the final phase of the programme.
The Bank held £488 billion of UK government bonds for monetary-policy purposes when it set the new framework in September 2026. It will let £222 billion of gilts maturing before 2035 run to maturity. Another £120 billion of the longest-dated gilts will remain in the Asset Purchase Facility to support current and future banknote issuance. That leaves £146 billion of gilts maturing between 2035 and 2049 for active sales under the quantitative tightening programme.
The Bank of England has discussed a new sales model with HM Treasury and the Debt Management Office for the £146 billion portfolio. Under the proposed structure, the government would buy the gilts from the Asset Purchase Facility at market prices. HM Treasury would instruct the Debt Management Office to make those purchases within the government’s financing arrangements. The Bank will review progress before April 2027, and the direct government purchase model still requires a final decision.
Government gilt sales model remains under review
The Monetary Policy Committee unanimously set active gilt sales at an annual rate of £20 billion under its new multi-year framework. The Bank said it will maintain that sales pace regardless of the final execution method, subject to the limited circumstances specified by the committee. Existing Asset Purchase Facility sales auctions are paused while officials review the implementation arrangements. The Bank expects to publish operational details by April 2027, whether or not the direct government purchase model proceeds.
The Asset Purchase Facility carries an HM Treasury indemnity covering gains and losses generated through its operations. Between 2009 and 2022, the facility transferred positive net cash flows to the Treasury, reaching a cumulative peak of £123.9 billion in September 2022. Since then, cash flows have moved from the Treasury to the facility. The Bank has said future cash flows remain sensitive to interest rates and gilt prices, while different unwind speeds do not necessarily change lifetime costs on a net present value basis.
Quantitative tightening enters final multi-year phase
The new schedule follows a substantial reduction in the Bank’s bond portfolio since quantitative tightening began. Monetary-policy gilt holdings fell from a peak of about £895 billion in February 2022 to £488 billion by September 2026. Over the latest 12-month period, the stock declined by £70 billion, including £21 billion through active gilt sales. Bank staff estimated that quantitative tightening accounted for about 20 to 30 basis points of the rise in UK long-term bond term premiums since the process started.
The Bank also kept Bank Rate at 3.75% at its September meeting, with the Monetary Policy Committee voting 6-3 on that decision. The quantitative tightening decision itself was unanimous. The central bank said Bank Rate remains its main tool for adjusting monetary policy. It also said gilt sales should remain gradual and predictable. Under the new framework, monetary-policy gilt holdings will reach zero by September 2034, while the separate £120 billion portfolio supporting banknote issuance will remain outside the quantitative tightening stock.