The Bank of England has announced a significant overhaul of its quantitative tightening program, including the cessation of long-dated gilt sales and a potential shift to direct sales of gilts to the government through the Debt Management Office (DMO). This revised approach, detailed on September 17, 2026, involves unwinding the £488 billion ($650 billion) portfolio by 2034. Barclays analysts believe this new strategy will alleviate pressure on the repo market by reducing the volume of gilts that would otherwise enter the market through auctions.
The Bank of England will retain £120 billion of gilts maturing in 2049 or later to back banknote issuance and run off another £222 billion that mature by 2035. The remaining £146 billion of gilts, maturing between 2035 and 2049, will be sold at a pace of £20 billion annually. The Bank is currently reviewing a model for selling these gilts directly to the government, potentially bypassing market auctions for these maturities. This new approach, which includes a six-month pause on gilt sales, is seen as a response to criticisms regarding its active bond sales program.
According to reports from Bloomberg and Reuters, the decision to halt long-dated gilt sales and explore direct sales to the DMO is a key aspect of the Bank's multi-year plan to reduce its government bond holdings to zero. The Bank of England stated that it will announce further operational details by April 2027, with the implementation of sales potentially beginning after that to align with the DMO's annual financing remit. The overall pace of sales, at £20 billion a year, is slower than in previous years, which analysts believe will help stabilize the bond market and reduce liquidity concerns.
