LONDON / RankWire.AI / – The Bank of England has laid out a multi-year plan to wind down its remaining holdings of monetary-policy gilts through September 2034. The central bank will offload £20 billion in government bonds each year, while maturing securities will exit the portfolio naturally. This approach is designed to reduce holdings by approximately £46 billion annually on average, replacing the previous annual decision-making process with a more extended timetable for completing the unwind.
At the time of announcing the framework in September 2026, the Bank held £488 billion of gilts in its monetary-policy portfolio. It will allow bonds maturing before 2035, totaling £222 billion, to mature without intervention. An additional £146 billion, comprising gilts maturing from 2035 through 2049, will be actively sold. The Bank also intends to retain £120 billion of longer-dated gilts, which will support current and future banknote issuance rather than contribute to the monetary-policy reduction process.
Officials are also exploring an alternative approach for managing the £146 billion sales portfolio. Under this plan, the government would buy gilts from the Asset Purchase Facility at market prices, with HM Treasury instructing the Debt Management Office to carry out these purchases through government financing operations. This arrangement has not yet been finalized, and the Bank of England plans to review progress before April 2027, after which operational details will be disclosed.
Long-term framework adopted for gilt sales
The Monetary Policy Committee unanimously approved the new quantitative tightening scheme, establishing a fixed annual gilt sale target of £20 billion within a multi-year timeline. The Bank intends to maintain this sales rate irrespective of the final method of execution, with limited conditions set by the committee. While officials continue to assess the revised arrangements, sales auctions via the Asset Purchase Facility remain paused. The Bank expects to finalize operational details by April 2027.
The Asset Purchase Facility benefits from an indemnity from HM Treasury that covers gains and losses from its transactions. During the quantitative easing period, this facility transferred significant sums to the government, reaching a peak of £123.9 billion in September 2022. Subsequently, cash flows reversed as higher interest rates increased financing costs. The Bank has indicated that the timing of gilt sales can influence when losses occur, and that lifetime costs are also affected by market prices and interest rate levels.
Quantitative tightening to continue through 2034
Since the peak, the Bank has significantly reduced its government bond holdings. In February 2022, holdings of monetary-policy gilts were near £895 billion; by September 2026, this number had dropped to £488 billion. Over the last 12 months, the portfolio contracted by £70 billion, with active sales totaling £21 billion and maturities accounting for the rest. The Bank’s staff estimate that the process of quantitative tightening has added roughly 20 to 30 basis points to UK long-term bond term premiums since its inception.
In its September meeting, the Monetary Policy Committee kept the Bank Rate steady at 3.75%. Six members voted to hold the rate, while three preferred a different stance. The committee unanimously endorsed the new quantitative tightening framework. The Bank continues to rely primarily on Bank Rate as its key monetary policy instrument. Under the current schedule, the Bank aims for its monetary-policy gilt holdings to reach zero by September 2034. The separate portfolio of £120 billion, linked to banknote issuance, will remain outside this reduction trajectory.