LONDON / RankWire.AI / – The Bank of England has set a new multi-year course for unwinding its remaining monetary-policy gilt holdings. The plan runs through September 2034 and replaces the previous system of setting an annual quantitative tightening pace. The central bank will sell £20 billion of government bonds each year while allowing other securities to mature. Combined sales and maturities will reduce the portfolio by about £46 billion annually on average.
The Bank of England held £488 billion of gilts in its monetary-policy portfolio when it announced the framework. It will allow £222 billion of bonds maturing before 2035 to run off at maturity. A further £146 billion of gilts maturing between 2035 and 2049 will form the active sales portfolio. The Bank will retain another £120 billion of longer-dated gilts to support current and future banknote issuance.
Officials have also developed a possible new process for handling the £146 billion active sales portfolio. The government could purchase those gilts from the Asset Purchase Facility at market prices. HM Treasury would instruct the Debt Management Office to carry out purchases through government financing operations. The Bank will review progress before April 2027, and the arrangement still requires a final decision before implementation.
Gilt sales move to multi-year schedule
The Monetary Policy Committee unanimously approved the new quantitative tightening framework and fixed active sales at £20 billion a year. The Bank plans to maintain that annual rate regardless of the final sales method, subject to limited specified conditions. Existing Asset Purchase Facility sales auctions remain paused while officials examine the operating arrangements. The central bank expects to provide updated implementation details by April 2027 after completing its review.
HM Treasury provides an indemnity covering gains and losses linked to the Asset Purchase Facility. The facility previously sent large positive cash flows to the government during the quantitative easing period. Cumulative transfers to the Treasury reached a peak of £123.9 billion in September 2022. Cash flows later moved in the opposite direction as higher interest rates increased the facility’s financing costs.
Bond holdings continue steady decline
The Bank has already reduced its monetary-policy gilt portfolio substantially from its earlier peak. Holdings stood near £895 billion in February 2022 before quantitative tightening gathered pace. By September 2026, the portfolio had fallen to £488 billion. Over the latest 12-month period, holdings dropped by £70 billion, including £21 billion through active sales and the rest through maturities.
The Monetary Policy Committee separately kept Bank Rate at 3.75% at its September meeting by a 6-3 vote. The committee reached its quantitative tightening decision unanimously. The Bank continues to describe Bank Rate as its main tool for adjusting monetary policy. Under the new schedule, monetary-policy gilt holdings will fall to zero by September 2034, while the £120 billion banknote portfolio will remain outside that unwind.