BoE to Pause Quantitative Tightening and Sell Gilts Directly to Treasury

The Bank of England will announce on September 17 that it will pause its quantitative-tightening (QT) programme for six months and move the sale of government bonds (gilts) from market auctions to a direct sale to the Treasury’s Debt Management Office (DMO). The BoE will retain £120 billion of long-dated gilts to back banknotes, hold £222 billion to maturity, and sell the remaining £146 billion of bonds maturing between 2035 and 2049 at about £20 billion per year until 2034. Chancellor John Healey’s sign-off is expected in April.

Bank of England halts long-dated gilt sales, rewrites plan to unwind QE The GuardianThe GuardianReuters

The BoE’s balance sheet peaked at £895 billion of gilts in February 2022 after large-scale QE. QT has reduced holdings to roughly £488 billion. Earlier this year the Monetary Policy Committee slowed the annual sale target from £100 billion to £70 billion; the new plan further moderates the pace and ends sales of 20- and 30-year gilts.

Bank of England halts long-dated gilt sales, rewrites plan to unwind QE

• Peak holdings: £895 billion -> current: £488 billion.

Bank of England set to halt long-term gilt sales amid bond sell-off - report

• Planned sales to Treasury: £146 billion (by 2034).

The Guardian

• Annual sale rate: £20 billion (2035-2049 tranche).

Bank of England halts long-dated gilt sales, rewrites plan to unwind QE

• Gilts retained for note-backing: £120 billion.

Private investors lose £2.8bn on gilts since 2020

• Estimated QT-related loss: £120 billion (BoE) vs. £47 billion (OBR) vs. £100 billion (five-year OBR projection).

Bank of England halts long-dated gilt sales, rewrites plan to unwind QE

• 30-year gilt yield expected to fall to around 5.75 % after the announcement.

Private investors lose £2.8bn on gilts since 2020

Healey’s office said the Treasury will decide by April. The DMO noted its ability to issue new bonds that match market demand, especially for shorter-dated gilts, reducing price pressure on long-dated securities.

The Guardian

Reform UK’s deputy leader Richard Tice called for a full halt to the BoE’s bond-selling programme, arguing that stopping QT could save taxpayers up to £2.5 billion a year by decade’s end. Economist Christopher Mahon described the BoE’s active sales as “twice as expensive” as the European Central Bank’s approach, highlighting the fiscal burden.

Reuters

• “Today we provided clarity over the future of our quantitative tightening policy,” — Andrew Bailey, Governor, Bank of England

Bank of England halts long-dated gilt sales, rewrites plan to unwind QE

• “These changes should be seen as gilt positive, in particular for long-end maturities,” — Matthew Amis, investment director, Aberdeen Investment

Bank of England halts long-dated gilt sales, rewrites plan to unwind QE

The BoE projects total QT losses at £120 billion if rates follow current expectations, while the OBR forecasts an addition of about £47 billion to government debt by 2031. Independent analysts suggest the cost could reach £100 billion over five years. No consensus exists on the precise magnitude, and the Treasury has not disclosed the methodology behind its forthcoming decision.

Bank of England set to halt long-term gilt sales amid bond sell-off - report

• April (2027): Treasury expected to give final approval or rejection of the direct-sale plan.

The Guardian

• October 28: Chancellor John Healey will deliver the first Budget of the new administration, likely referencing the gilt-sale proposal.

Reform UK Calls on Chancellor Healey to Halt Bank of England Bond Sales

• November (2027): The BoE’s next MPC meeting may revisit the QT pace if inflationary pressures persist.

Reuters