LONDON / RankWire.AI / – Bank of England has outlined a multi-year strategy to wind down its remaining monetary-policy gilt holdings by September 2034. The central bank will offload £20 billion of government bonds annually while allowing others to mature naturally. This approach will reduce the portfolio by an average of £46 billion each year through sales and maturities. It replaces the former yearly approach to quantitative tightening, offering a clear pathway for the programme’s concluding phase.
UK government bonds held by the Bank for monetary-policy purposes amounted to £488 billion when the new framework was established in September 2026. The Bank plans to 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 ongoing and future banknote issuance. This leaves £146 billion of gilts maturing between 2035 and 2049 to be actively sold under the quantitative tightening programme.
Discussions between the Bank of England, HM Treasury, and the Debt Management Office have considered 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 instruct the Debt Management Office to execute these purchases within the government’s financing plans. The Bank intends to review the progress before April 2027, and a final decision on the direct government purchase model is still pending.
Review Continues on Government Gilt Sale Strategy
Monetary Policy Committee has unanimously committed to active gilt sales at a rate of £20 billion annually under the new multi-year plan. The Bank stated that it will maintain this sales rate regardless of the final method of execution, except in limited circumstances outlined by the committee. While officials review implementation options, the current Asset Purchase Facility sales auctions are temporarily paused. The Bank expects to release operational details by April 2027, whether or not the direct government purchase model proceeds.
The Asset Purchase Facility benefits from an HM Treasury indemnity that covers 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 highlighted that future cash flows depend on interest rates and gilt prices, and that varying unwind speeds do not necessarily affect the overall costs on a net present value basis.
The Final Phase of Quantitative Tightening Begins
Following a significant reduction in its bond portfolio 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 portfolio shrank by £70 billion, including £21 billion through active gilt sales. Officials estimate that quantitative tightening contributed approximately 20 to 30 basis points to the increase in long-term bond term premiums in the UK since the process started.
At its September meeting, the Bank maintained the Bank Rate at 3.75%, with the Monetary Policy Committee voting 6-3 on this decision. The decision to continue with quantitative tightening was unanimous. The Bank reaffirmed that the Bank Rate remains its primary monetary policy tool and emphasized that gilt sales should proceed gradually and predictably. Under the new plan, 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 quantitative tightening process.