LONDON / RankWire.AI / – The Bank of England has established a multi-year strategy to gradually unwind its remaining monetary-policy gilt holdings by September 2034. The central bank plans to offload £20 billion worth of government bonds annually while letting other gilts mature. This combination of sales and maturities will cut the portfolio by an average of £46 billion each year. The new plan replaces the previous yearly approach to quantitative tightening and sets a clear route for the final phase of the initiative.
At the time it introduced the new framework in September 2026, the Bank held £488 billion of UK government bonds for monetary-policy purposes. It will allow £222 billion of gilts maturing before 2035 to reach maturity naturally, while another £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 for active sales under the quantitative tightening program.
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 proposed approach, the government would purchase these gilts from the Asset Purchase Facility at prevailing market prices, with HM Treasury instructing the Debt Management Office to carry out these transactions within the government’s financing framework. The Bank plans to review progress before April 2027, but the direct government purchase model still requires a final decision.
Review Continues on Government Gilt Sale Approach
The Monetary Policy Committee unanimously agreed to set active gilt sales at an annual rate of £20 billion under its new multi-year framework. The Bank indicated it will sustain this sales pace regardless of the final method of implementation, except in limited circumstances specified by the committee. Auctions of existing Asset Purchase Facility sales are currently paused as officials evaluate the implementation process. The Bank expects to release 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 from its activities. From 2009 to 2022, the facility transferred positive net 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 has noted that future cash flows will remain sensitive to interest rates and gilt prices, and that different unwind speeds may not necessarily alter the overall costs on a net present value basis.
Quantitative Tightening Enters Its Final Phase
The revised 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 Bank’s monetary-policy gilt holdings fell to £488 billion by September 2026. During the most recent 12 months, the portfolio shrank by £70 billion, including £21 billion through active gilt sales. Bank officials estimate that quantitative tightening contributed roughly 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 also maintained the Bank Rate at 3.75%, with the Monetary Policy Committee voting 6-3 on this decision, while the quantitative tightening move was unanimously supported. The central bank reaffirmed that the Bank Rate remains its primary instrument for monetary policy adjustments. It also emphasized that gilt sales should continue to be conducted gradually and predictably. Under the updated framework, monetary-policy gilt holdings will reach zero by September 2034, while the separate £120 billion portfolio backing banknote issuance will stay outside the quantitative tightening stock.