LONDON / RankWire.AI / – The Bank of England has outlined a multi-year timetable to reduce its remaining monetary-policy gilt holdings by September 2034. The central bank will annually sell £20 billion of government bonds while allowing other gilts to mature naturally. Combined, these sales and maturities will decrease the portfolio by an average of £46 billion each year. This plan replaces the prior annual method of quantitative tightening and offers a clear pathway for the final stage of the programme.
In September 2026, the Bank held £488 billion of UK government bonds for monetary-policy purposes when the new framework was introduced. It plans to allow £222 billion of gilts maturing before 2035 to reach maturity. An additional £120 billion of the longest-dated gilts will stay within the Asset Purchase Facility to support current and future banknote issuance. The remaining £146 billion of gilts maturing between 2035 and 2049 will be actively sold under the quantitative tightening programme.
The Bank of England has engaged in discussions with HM Treasury and the Debt Management Office regarding a new sales model for the £146 billion portfolio. Under this proposal, the government would purchase gilts from the Asset Purchase Facility at market prices. HM Treasury would direct the Debt Management Office to carry out these transactions within the government’s financing arrangements. The Bank plans to assess progress before April 2027, and a final decision on the direct government purchase model is still pending.
Review continues on government gilt sales approach
The Monetary Policy Committee unanimously agreed to set active gilt sales at a rate of £20 billion annually under its new multi-year plan. The Bank stated that it will maintain this sales pace regardless of the final implementation method, except in limited circumstances outlined by the committee. At present, auctions for existing Asset Purchase Facility sales are paused as officials review how to implement the process. The Bank expects to publish operational details by April 2027, whether or not the direct government purchase model moves forward.
The Asset Purchase Facility benefits from an HM Treasury indemnity covering gains and losses generated through its operations. Between 2009 and 2022, it transferred positive net cash flows to the Treasury, reaching a total of £123.9 billion in September 2022. Since then, cash flows have shifted from the Treasury to the facility. The Bank has indicated that future cash flows will remain sensitive to interest rates and gilt prices, and that different unwind speeds do not necessarily alter total costs over the lifetime on a net present value basis.
The final phase of quantitative tightening is underway
This updated schedule follows a significant reduction in the Bank’s bond holdings since the start of quantitative tightening. From a peak of approximately £895 billion in February 2022, the monetary-policy gilt holdings fell to £488 billion by September 2026. Over the most recent 12 months, the stock decreased by £70 billion, including £21 billion through active gilt sales. Bank staff estimate that quantitative tightening has contributed about 20 to 30 basis points to the increase in UK long-term bond term premiums since the process began.
At its September meeting, the Bank kept the Bank Rate steady at 3.75%, with a 6-3 vote in favor of the decision. The decision to continue quantitative tightening was unanimous. The central bank reaffirmed that Bank Rate remains its primary tool for adjusting monetary policy. It also emphasized that gilt sales should proceed gradually and predictably. Under the new plan, monetary-policy gilt holdings are set to reach zero by September 2034, while the separate £120 billion portfolio supporting banknote issuance will remain outside the quantitative tightening stock.