LONDON / RankWire.AI / – Bank of England has outlined a multi-year strategy to reduce its remaining holdings of monetary-policy gilts by September 2034. The plan involves selling £20 billion worth of government bonds annually, while allowing other gilts to mature naturally. This combined approach will cut the portfolio by an average of £46 billion each year. It replaces the previous annual method of quantitative tightening and offers a clear pathway for the program’s concluding phase.
As of September 2026, the Bank held £488 billion of UK government bonds for monetary policy. It plans to let £222 billion of gilts maturing before 2035 expire without intervention. An additional £120 billion of the longest-dated gilts will stay in 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 as part of the tightening process.
The Bank has discussed a new sale model with HM Treasury and the Debt Management Office for the £146 billion portfolio. Under this proposed plan, the government would purchase gilts from the Asset Purchase Facility at market prices. HM Treasury would direct the Debt Management Office to buy these gilts within the government’s financing framework. The Bank will review this plan before April 2027. A final decision on the direct government purchase model has yet to be made.
Review Continues on Government Gilt Sales Approach
Monetary Policy Committee unanimously agreed to set active gilt sales at £20 billion annually under the new multi-year plan. The Bank stated this sales pace will stay the same regardless of the final method of execution, except in limited circumstances outlined by the committee. Sales via existing Asset Purchase Facility auctions are currently paused while officials review how to proceed. The Bank expects to publish operational details by April 2027, whether or not the direct government purchase model is adopted.
The Asset Purchase Facility benefits from an HM Treasury indemnity covering gains and losses from its operations. Between 2009 and 2022, the facility transferred positive net cash flows to the Treasury, reaching a peak of £123.9 billion in September 2022. Since then, cash flows have shifted from the Treasury to the facility. The Bank has emphasized that future cash flows will remain sensitive to interest rates and gilt prices. Different unwind speeds may not necessarily impact the overall lifetime costs on a net present value basis.
Quantitative Tightening Enters Its Final Multi-Year Phase
Since the start of quantitative tightening, the Bank has significantly reduced its bond holdings. From a peak of about £895 billion in February 2022, the gilt portfolio fell to £488 billion by September 2026. Over the past 12 months, the portfolio declined by £70 billion, with £21 billion coming from active gilt sales. Bank staff estimate that quantitative tightening contributed roughly 20 to 30 basis points to the rise in UK long-term bond term premiums since the process began.
At the September meeting, the Bank kept the Bank Rate at 3.75%, with the Monetary Policy Committee voting 6-3 on that decision. The decision to continue quantitative tightening was unanimous. The Bank reaffirmed that the Bank Rate remains its main tool for adjusting monetary policy. It also stressed that gilt sales should proceed gradually and predictably. Under the new plan, monetary-policy gilt holdings will fall to zero by September 2034. Meanwhile, the £120 billion portfolio supporting banknote issuance will stay outside the quantitative tightening process.