LONDON / RankWire.AI / – Bank of England has outlined a multi-year plan to wind down its remaining holdings of monetary-policy gilts by September 2034. The central bank intends to sell £20 billion of government bonds annually, while allowing other gilts to mature naturally. This combination of sales and maturities is expected to decrease the portfolio by an average of £46 billion each year. The new approach replaces the previous annual quantitative tightening method and offers a clear path for the programme’s final phase.
At the time of establishing this framework in September 2026, the Bank held £488 billion of UK government bonds for monetary-policy purposes. It will let £222 billion of gilts maturing before 2035 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. This leaves £146 billion of gilts maturing between 2035 and 2049 designated for active sales under the quantitative tightening plan.
The Bank has discussed a new sales framework with HM Treasury and the Debt Management Office for the £146 billion portfolio. Under this plan, the government would purchase gilts from the Asset Purchase Facility at market value. HM Treasury would direct the Debt Management Office to conduct these purchases within the government’s financing arrangements. The Bank intends to review progress before April 2027, but a final decision on this direct purchase approach is still pending.
Review Continues on Government Gilt Sales Strategy
The Monetary Policy Committee unanimously approved setting active gilt sales at £20 billion per year under the new multi-year plan. The Bank has stated that it will keep this sales pace unchanged regardless of the chosen implementation method, except under limited circumstances specified by the committee. Currently, auctions of existing Asset Purchase Facility gilts are paused while officials evaluate the operational arrangements. The Bank plans to publish detailed procedures by April 2027, regardless of whether the direct government purchase model moves forward.
The Asset Purchase Facility benefits from an HM Treasury indemnity covering gains and losses from its activities. Between 2009 and 2022, the facility transferred net positive cash flows to the Treasury, peaking at £123.9 billion in September 2022. Since then, cash flows have shifted from the Treasury back to the facility. The Bank notes that future cash flows are sensitive to interest rate and gilt price changes, and different unwind speeds do not necessarily alter total lifetime costs on a net present value basis.
Quantitative Tightening Enters Its Final Multi-Year Stage
This schedule follows significant reductions in the Bank’s bond holdings since the start of quantitative tightening. The Bank’s monetary-policy gilt holdings decreased from a peak of around £895 billion in February 2022 to £488 billion by September 2026. Over the last 12 months, the stock declined by £70 billion, with £21 billion from active gilt sales. Bank analysts 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.
The Bank also maintained the Bank Rate at 3.75% in its September meeting, with a 6-3 vote on that decision. The unanimous vote was for the quantitative tightening plan itself. The central bank reaffirmed that Bank Rate remains its primary tool for monetary policy adjustments and emphasized that gilt sales should proceed gradually and predictably. Under the new framework, the monetary-policy gilt holdings will be reduced to zero by September 2034, while the separate £120 billion portfolio supporting banknote issuance will remain outside the quantitative tightening process.