LONDON / RankWire.AI / – The Bank of England has announced a multi-year plan to gradually reduce 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 combined approach will decrease the portfolio by an average of £46 billion each year. The new plan replaces the previous annual method of quantitative tightening and establishes a clear path for the final phase of the programme.
As of September 2026, the Bank held £488 billion of UK government bonds for monetary policy purposes. It plans to let £222 billion of gilts maturing before 2035 reach maturity without intervention. 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, which are designated for active sale under the quantitative tightening plan.
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 scheme, the government would purchase gilts from the Asset Purchase Facility at prevailing market prices. HM Treasury would then instruct the Debt Management Office to execute these purchases within the government’s financing framework. The Bank intends to review progress before April 2027, but the direct government purchase model has yet to receive a final approval.
Review of the Government Gilt Sales Approach Continues
The Monetary Policy Committee unanimously agreed to set active gilt sales at an annual rate of £20 billion under the new multi-year framework. The Bank confirmed that it will stick to this sales pace regardless of the chosen implementation method, except in limited circumstances specified by the committee. While existing Asset Purchase Facility sales auctions are currently paused, officials are reviewing how the implementation will proceed. The Bank expects to publish operational details by April 2027, whether or not the direct government purchase approach moves forward.
The Asset Purchase Facility benefits from an HM Treasury indemnity covering gains and losses generated through its operations. 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 are sensitive to interest rate movements and gilt prices. Additionally, different unwind speeds do not necessarily impact the programme’s overall lifetime costs on a net present value basis.
The Final Stage of Quantitative Tightening Enters a Multi-Year Phase
This new schedule follows a significant reduction in the Bank’s bond holdings since the start of quantitative tightening. The Bank’s monetary-policy gilt holdings declined from a peak of around £895 billion in February 2022 to £488 billion as of September 2026. Over the last 12 months, the portfolio shrank by £70 billion, with £21 billion of that amount coming from 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 maintained Bank Rate at 3.75%, with the Monetary Policy Committee voting 6-3 on that decision. The unanimous vote was for the quantitative tightening measures. The Bank reaffirmed that Bank Rate remains its primary tool for adjusting monetary policy. It also emphasized that gilt sales should proceed gradually and in a predictable manner. Under the new framework, the Bank’s monetary-policy gilt holdings will reach zero by September 2034, while the £120 billion portfolio supporting banknote issuance will stay outside the quantitative tightening stock.