LONDON / RankWire.AI / – The Bank of England has outlined a multi-year plan to gradually reduce its remaining holdings of monetary-policy gilts by September 2034. Under this plan, the central bank will sell £20 billion worth of government bonds annually, while allowing other gilts to mature naturally. This combined approach will decrease the total portfolio by an average of £46 billion each year. The new strategy replaces the previous annual approach to quantitative tightening and provides a clear roadmap for the final stage of the process.
As of September 2026, the Bank held £488 billion of UK government bonds for monetary-policy objectives. It plans to let £222 billion of gilts maturing before 2035 mature without intervention. An additional £120 billion of the longest-dated gilts will stay in the Asset Purchase Facility to support current and future banknote issuance. This leaves £146 billion of gilts maturing between 2035 and 2049, which will be actively sold as part of the quantitative tightening program.
The Bank of England has discussed a new sales model with HM Treasury and the Debt Management Office concerning the £146 billion portfolio. The proposed approach involves the government purchasing gilts from the Asset Purchase Facility at market prices. HM Treasury would direct the Debt Management Office to conduct these purchases within the government’s financing plans. The Bank will assess progress before April 2027, and a final decision on the direct government purchase model is still pending.
Review of Government Gilt Sales Strategy Continues
The Monetary Policy Committee unanimously agreed on active gilt sales at a rate of £20 billion annually under its new multi-year framework. The Bank has stated that this sales pace will be maintained regardless of the final implementation method, except in limited circumstances outlined by the committee. Currently, existing Asset Purchase Facility sales auctions are paused as officials review how to proceed. The Bank anticipates releasing 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 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, the cash flows have shifted from the Treasury back to the facility. The Bank has indicated that future cash flows are still sensitive to interest rates and gilt prices, and that different unwind speeds may not necessarily influence the overall lifetime costs 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. The central bank’s monetary-policy gilt holdings decreased from a peak of approximately £895 billion in February 2022 to £488 billion by September 2026. In the last 12 months alone, the stock declined by £70 billion, with £21 billion of that coming from active gilt sales. Bank staff 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 the Bank Rate at 3.75%, with the Monetary Policy Committee voting 6-3 on the decision. The decision to proceed with quantitative tightening was unanimous. The central bank reaffirmed that Bank Rate remains its primary tool for monetary policy adjustments. It also emphasized that gilt sales should proceed gradually and predictably. Under the new framework, the Bank aims for its monetary-policy gilt holdings to reach zero by September 2034, while a separate £120 billion portfolio supporting banknote issuance will remain outside the quantitative tightening process.