LONDON / RankWire.AI / – The Bank of England has unveiled a comprehensive multi-year strategy to diminish its remaining monetary-policy gilt holdings by September 2034. The plan involves the sale of £20 billion in government bonds annually, with other securities naturally leaving the portfolio as they mature. This approach aims to reduce total holdings by approximately £46 billion each year on average. Replacing the previous practice of annual decisions on the pace of quantitative tightening, this framework extends the timetable for completing the process.
At the time of announcing this framework in September 2026, the Bank’s monetary-policy portfolio contained £488 billion in gilts. It will allow £222 billion of bonds maturing before 2035 to expire without intervention. An additional £146 billion, comprising gilts maturing from 2035 to 2049, will be actively sold. The Bank also intends to hold onto £120 billion of longer-term gilts, which will support current and future banknote issuance rather than contribute to the monetary-policy unwind.
The authorities are also exploring an alternative approach for managing the £146 billion sales portfolio. Under this potential model, the government would buy gilts from the Asset Purchase Facility at market prices, with HM Treasury directing the Debt Management Office to execute such purchases through government financing operations. This plan has not yet received final approval. The Bank of England will review its progress before April 2027 and will release operational details following that assessment.
Shift to a Long-Term Gilt Sales Framework
The Monetary Policy Committee unanimously endorsed the new quantitative tightening plan, establishing active gilt sales at £20 billion annually within the multi-year schedule. The Bank intends to maintain this sales level regardless of the eventual method of implementation, subject to limited conditions set by the committee. Presently, sales auctions conducted by the Asset Purchase Facility are on hold while officials evaluate the revised strategy. The central bank expects to detail the operational framework by April 2027.
The Asset Purchase Facility benefits from an indemnity from HM Treasury that covers gains and losses associated with its transactions. During the quantitative easing period, the facility made significant cash transfers to the government, reaching a peak of £123.9 billion in September 2022. Subsequently, these flows reversed as rising interest rates increased financing costs. The Bank has noted that the timing of gilt sales can influence when losses occur, with total lifetime costs also affected by market prices and interest rate fluctuations.
Quantitative Tightening to End in 2034
The Bank has already reduced its government bond holdings substantially from their peak, which stood near £895 billion in February 2022. By September 2026, holdings had declined to £488 billion. Over the most recent 12 months, the portfolio shrank by £70 billion, with active gilt sales accounting for £21 billion of that reduction, complemented by maturing securities. Bank staff estimate that the process of quantitative tightening has contributed roughly 20 to 30 basis points to UK long-term bond term premiums since its initiation.
In its September meeting, the Monetary Policy Committee maintained the Bank Rate at 3.75%. Six members voted to hold the rate, while three preferred a different stance. The committee also unanimously supported the new quantitative tightening framework. The Bank continues to prioritize the Bank Rate as its primary monetary-policy tool. Under the updated schedule, the Bank’s holdings of government bonds related to monetary policy are set to reach zero by September 2034. The separate portfolio of £120 billion, associated with banknote issuance, will remain outside this reduction plan.