LONDON / RankWire.AI / – In September 2026, the Bank of England announced a comprehensive plan to gradually unwind its remaining holdings of monetary-policy gilts by September 2034. The scheme involves selling £20 billion worth of government bonds annually, with the rest maturing naturally. This combined approach aims to reduce the bank’s gilt portfolio by an average of £46 billion each year, replacing the earlier annual quantitative tightening method with a clearly defined pathway for the final stage of the process.
At the time of establishing this framework, the Bank held £488 billion of UK government bonds for monetary-policy aims. The Bank will allow £222 billion of gilts maturing before 2035 to reach maturity without intervention. An additional £120 billion of the longest-dated gilts will stay within the Asset Purchase Facility to support current and future banknote issuance. The remaining £146 billion, maturing between 2035 and 2049, will be actively sold as part of the quantitative tightening plan.
The Bank of England has discussed a new sale approach with HM Treasury and the Debt Management Office concerning the £146 billion portfolio. Under this plan, the government would acquire gilts from the Asset Purchase Facility at current market prices. HM Treasury would direct the Debt Management Office to carry out these purchases within the government’s financing framework. The Bank will assess the progress of this process before April 2027, and a final decision on the direct government purchase model remains pending.
Review Continues on Government Gilt Sales Strategy
The Monetary Policy Committee unanimously set an annual gilt sales target of £20 billion under its revised multi-year approach. According to the Bank, this sales rate will be maintained regardless of the chosen implementation method, except in limited circumstances outlined by the committee. Currently, auctions for existing Asset Purchase Facility sales are on hold as officials review the operational procedures. The Bank anticipates publishing detailed operational guidance by April 2027, whether or not the direct government purchase model is adopted.
The Asset Purchase Facility benefits from an HM Treasury indemnity covering gains and losses incurred through its operations. Between 2009 and 2022, the facility transferred positive net cash flows to the Treasury, with 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 sensitive to fluctuations in interest rates and gilt prices, and that different unwind speeds do not necessarily impact the overall cost on a net present value basis.
Quantitative Tightening Enters Its Final Multi-Year Phase
Following a significant reduction in the Bank’s bond holdings since the start of quantitative tightening, the portfolio has decreased from a peak of approximately £895 billion in February 2022 to £488 billion as of September 2026. Over the past 12 months alone, the stock declined by £70 billion, including £21 billion through active gilt sales. Bank staff estimate that quantitative tightening contributed about 20 to 30 basis points to the increase in UK long-term bond term premiums since the process began.
At its September meeting, the Bank also maintained the Bank Rate at 3.75%, with a 6-3 vote supporting that decision. The decision to proceed with quantitative tightening was unanimous. The central bank reaffirmed that Bank Rate remains its primary instrument for monetary policy adjustments. It emphasized that gilt sales should continue to be phased in gradually and transparently. Under the new framework, the Bank’s holdings of monetary-policy gilts will fall to zero by September 2034, while the separate £120 billion portfolio supporting banknote issuance will remain outside the quantitative tightening stock.