LONDON / RankWire.AI / – The Bank of England has established a multi-year plan aimed at gradually reducing its remaining holdings of monetary-policy gilts by September 2034. Under this plan, the central bank will offload £20 billion worth of government bonds annually, while allowing other gilts to mature naturally. When combined, sales and maturities are projected to decrease the overall portfolio by an average of £46 billion each year. This approach replaces the previous annual methodology for quantitative tightening, offering a clear pathway for the final stage of the process.
At the time of establishing this new framework in September 2026, the Bank held £488 billion of UK government bonds intended for monetary-policy purposes. The Bank will allow £222 billion of gilts maturing before 2035 to mature without intervention. Additionally, another £120 billion of the longest-dated gilts will remain within the Asset Purchase Facility to support current and future banknote issuance activities. This leaves a residual amount of £146 billion of gilts maturing between 2035 and 2049, which will be actively sold as part of the quantitative tightening programme.
Discussions have taken place between the Bank of England, HM Treasury, and the Debt Management Office regarding a new sales model for the £146 billion portfolio. Under this proposed structure, the government would acquire gilts from the Asset Purchase Facility at prevailing market prices, with HM Treasury instructing the Debt Management Office to execute these purchases within the framework of the government’s financing plans. The Bank intends to assess the progress of this arrangement before April 2027, and a final decision on whether to adopt the direct government purchase approach remains pending.
Review Continues on Government Gilt Sale Strategy
The Monetary Policy Committee has unanimously determined that active gilt sales will be carried out at an annual rate of £20 billion under this new multi-year plan. The Bank has clarified that it will sustain this sales pace regardless of the final method of execution, except in specific limited circumstances outlined by the committee. Current Asset Purchase Facility sales auctions are on hold as officials review the operational arrangements, with plans to publish detailed procedures by April 2027, whether or not the direct purchase model by the government proceeds.
The Asset Purchase Facility benefits from an HM Treasury indemnity covering gains and losses resulting from its operations. From 2009 to 2022, the facility transferred positive net cash flows to the Treasury, reaching a maximum of £123.9 billion in September 2022. Since then, however, cash flows have shifted from the Treasury back to the facility. The Bank has acknowledged that future cash flows remain sensitive to fluctuations in interest rates and gilt prices, and that varying unwind speeds do not necessarily alter the total lifetime costs when calculated on a net present value basis.
Quantitative Tightening Enters Its Final Multi-Year Phase
This new schedule follows a significant reduction in the Bank’s bond holdings since the start of quantitative tightening, with monetary-policy gilt assets declining from approximately £895 billion in February 2022 to £488 billion as of September 2026. During the most recent 12 months, the overall stock shrank by £70 billion, including £21 billion through active gilt sales. Bank staff estimate that the process of quantitative tightening has contributed roughly 20 to 30 basis points to the increase in UK long-term bond term premiums since the start of the program.
At its September meeting, the Bank also maintained the Bank Rate at 3.75%, with the Monetary Policy Committee voting 6-3 in favor of that decision. The unanimous vote was for the quantitative tightening measure itself. The Bank emphasized that the Bank Rate continues to serve as its primary instrument for monetary policy adjustments and that gilt sales should proceed in a gradual, predictable manner. Under the new framework, the Bank’s holdings of monetary-policy gilts will reach zero by September 2034, while the separate £120 billion portfolio supporting banknote issuance will remain outside the scope of quantitative tightening.