LONDON / RankWire.AI / – The Bank of England has laid out a multi-year plan to wind down its remaining holdings of monetary-policy gilts by September 2034, with the central bank set to offload £20 billion worth of government bonds annually. As bonds mature, other securities will exit the portfolio, resulting in an average annual reduction of roughly £46 billion. This framework replaces the previous approach of annual decisions on quantitative tightening pace with a longer-term timetable for completing the process.
At the time of announcing the plan in September 2026, the Bank held £488 billion of gilts within its monetary-policy portfolio. It plans to let £222 billion of bonds maturing before 2035 mature naturally, while actively selling the remaining £146 billion, which includes gilts maturing from 2035 through 2049. Additionally, the Bank intends to keep £120 billion of longer-dated gilts, which will support current and future banknote issuance rather than form part of the unwind of its monetary-policy holdings.
An alternative approach under consideration involves the government purchasing the £146 billion sales portfolio from the Asset Purchase Facility at market prices. HM Treasury would instruct the Debt Management Office to execute these transactions through government financing operations. This proposal is still awaiting final approval, with the Bank of England set to review progress before April 2027 and release operational details afterward.
Gilt sales transition to long-term schedule
The Monetary Policy Committee unanimously endorsed the new quantitative tightening strategy, establishing active gilt sales at £20 billion annually under the extended timetable. The Bank plans to maintain this sales pace regardless of the final method of execution, subject to limited conditions set by the committee. While the Asset Purchase Facility’s current auctions are paused as officials review the new framework, the central bank expects to define operational procedures by April 2027.
The Asset Purchase Facility benefits from an indemnity from HM Treasury for gains and losses on its transactions. During the quantitative easing period, the facility made substantial cash transfers to the government, reaching £123.9 billion at their September 2022 peak. Later, these flows reversed as rising interest rates increased financing costs. The Bank has indicated that the timing of gilt sales influences when losses occur, with total lifetime costs also affected by market prices and interest rate shifts.
Quantitative tightening persists until 2034
Since its peak, the Bank has significantly reduced its government bond holdings, with monetary-policy gilts dropping from nearly £895 billion in February 2022 to £488 billion in September 2026. Over the past year, the portfolio shrank by £70 billion, with active sales contributing £21 billion and maturities accounting for the rest. Bank staff estimate that the tightening process has increased UK long-term bond term premiums by roughly 20 to 30 basis points since its initiation.
During its September meeting, the Monetary Policy Committee unanimously decided to keep Bank Rate at 3.75%, with six members opting to hold and three preferring a different move. The committee also fully supported the new quantitative tightening plan. The Bank continues to regard Bank Rate as its primary monetary-policy instrument. Under the revised schedule, the Bank aims for its monetary-policy gilt holdings to reach zero by September 2034, while the £120 billion portfolio tied to banknote issuance will remain outside this reduction trajectory.