LONDON / RankWire.AI / – The Bank of England has established a multi-year plan to wind down its remaining holdings of monetary-policy gilts by September 2034. The central bank will offload £20 billion of government bonds annually while allowing other gilts to mature naturally. With both sales and maturities combined, the portfolio will shrink by an average of £46 billion each year. This plan replaces the previous annual approach to quantitative tightening and offers a clear route for the final phase of the programme.
As of September 2026, the Bank held £488 billion of UK government bonds used for monetary-policy purposes when it announced the new framework. It will allow £222 billion of gilts maturing before 2035 to run to maturity. An additional £120 billion of the longest-dated gilts will stay in the Asset Purchase Facility to support current and future banknote issuance. The remaining £146 billion of gilts maturing between 2035 and 2049 are earmarked for active sales under the quantitative tightening initiative.
The Bank of England has been in discussions with HM Treasury and the Debt Management Office regarding a new sales model for the £146 billion portfolio. Under this proposal, the government would purchase the gilts from the Asset Purchase Facility at current market prices. HM Treasury would instruct the Debt Management Office to execute these purchases within the government’s financing framework. The Bank plans to review the progress before April 2027, and a final decision on the direct government purchase approach has yet to be made.
Review of the government’s gilt sales approach ongoing
The Monetary Policy Committee unanimously agreed to set active gilt sales at an annual rate of £20 billion under its new multi-year framework. The Bank stated that it will sustain this sales pace regardless of the final method of execution, except in limited circumstances outlined by the committee. Currently, the Asset Purchase Facility’s existing sales auctions are paused while officials evaluate the implementation process. The Bank anticipates releasing operational details by April 2027, whether or not the direct government purchase model moves forward.
The Asset Purchase Facility benefits from an HM Treasury indemnity that covers gains and losses resulting from its operations. From 2009 to 2022, the facility transferred positive net cash flows to the Treasury, reaching a peak of £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 will remain highly sensitive to interest rate and gilt price fluctuations, and that varying unwind speeds do not necessarily alter the total cost on a net present value basis.
The final phase of quantitative tightening begins
This new schedule follows a significant reduction in the Bank’s bond holdings since the start of quantitative tightening. Gilt holdings used for monetary policy shrank from about £895 billion in February 2022 to £488 billion by September 2026. Over the past year, the portfolio decreased by £70 billion, including £21 billion through active gilt sales. Bank officials estimate that quantitative tightening contributed approximately 20 to 30 basis points to the increase in UK long-term bond term premiums since the process started.
At its September meeting, the Bank also maintained the Bank Rate at 3.75%, with the Monetary Policy Committee voting 6-3 on this decision. The decision to continue with quantitative tightening was unanimous. The Bank reaffirmed that the Bank Rate remains its primary instrument for monetary policy adjustment and emphasized that gilt sales should proceed gradually and predictably. Under the new plan, the Bank’s monetary-policy gilt holdings will reach zero by September 2034, while the separate £120 billion portfolio supporting banknote issuance will stay outside the quantitative tightening stock.