LONDON / RankWire.AI / – The Bank of England has outlined a multi-year strategy to gradually reduce its remaining holdings of monetary-policy gilts through September 2034. Under this plan, the central bank will dispose of £20 billion worth of government bonds each year. Additional securities will exit the portfolio as they mature. On average, this approach is expected to decrease holdings by approximately £46 billion annually. This framework replaces yearly decisions on the pace of quantitative tightening with a longer-term timetable for completing the process.
At the time of announcing this plan in September 2026, the Bank held £488 billion of gilts in its monetary-policy portfolio. It will allow £222 billion of bonds maturing before 2035 to mature naturally. An additional £146 billion, consisting of gilts maturing from 2035 through 2049, will form the active sales portfolio. The Bank also plans to retain £120 billion of longer-dated gilts, which will support current and future banknote issuance rather than being part of the monetary-policy unwinding.
Officials are also exploring an alternative approach for managing the £146 billion sales portfolio. Under this model, the government would buy gilts from the Asset Purchase Facility at market prices. HM Treasury would direct the Debt Management Office to execute these purchases through government financing operations. This arrangement has not yet received final approval. The Bank of England intends to review the progress before April 2027 and will publish operational details following that review.
Gilt sales transition to a long-term plan
The Monetary Policy Committee unanimously approved the new quantitative tightening strategy, establishing active gilt sales at £20 billion annually as part of the multi-year schedule. The Bank intends to maintain this sales pace regardless of the final implementation method, subject to limited conditions set by the committee. Currently, Asset Purchase Facility sales auctions remain on hold while officials evaluate the revised arrangements. The central bank expects to publish details on the operational structure by April 2027.
The Asset Purchase Facility benefits from an indemnity from HM Treasury, covering gains and losses from 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. Later, cash flows reversed as higher interest rates increased financing costs. The Bank has noted that the timing of gilt sales can influence when losses occur, and overall costs depend on prevailing interest rates and market prices.
Quantitative tightening set to extend through 2034
The Bank has already significantly reduced its government bond holdings from their peak. In February 2022, the monetary-policy gilt holdings approached £895 billion, but by September 2026, they had fallen to £488 billion. Over the most recent 12 months, the portfolio shrank by £70 billion, with active gilt sales accounting for £21 billion of the decline and maturities making up the rest. Bank staff have estimated that the quantitative tightening process has added roughly 20 to 30 basis points to UK long-term bond term premiums since its initiation.
At its September meeting, the Monetary Policy Committee voted unanimously to keep the Bank Rate at 3.75%. Six members favored maintaining the current rate, while three preferred a different stance. The committee also unanimously supported the new quantitative tightening plan. The Bank continues to see the Bank Rate as its primary monetary-policy instrument. Under the revised schedule, the Bank’s holdings of gilts linked to monetary policy will be reduced to zero by September 2034. The separate portfolio of £120 billion used for banknote issuance will remain outside this reduction trajectory.