Bank of England Halts Long-Dated Gilt Sales, Sets 2034 QE Unwind Target

The Bank of England has halted sales of long-dated British government bonds and paused all gilt auctions for six months as part of a multi-year plan to unwind the bulk of its remaining £488 billion quantitative easing portfolio by 2034.

The decision, announced alongside an expected hold in interest rates, follows a sharp rise in British 30-year borrowing costs, which days earlier touched their highest level since 1998 amid a global bond selloff. The market turbulence has renewed criticism that the central bank's bond sale policy locks in losses ultimately borne by taxpayers.

"Today we provided clarity over the future of our quantitative tightening policy," Governor Andrew Bailey said. "The Monetary Policy Committee and Bank have decided to withhold a substantial part of the stock of gilts held for monetary policy purposes while the remainder will be unwound over the next eight years."

Bailey has long emphasised reducing interest-rate risk on the Bank's balance sheet, which is heightened by holding long-dated gilts. The central bank argues that changing the pace of sales mainly affects the timing of losses to the government rather than their total size.

Under the plan, the Bank will reduce to zero the gilts it holds for monetary policy purposes. Of the £488 billion remaining, £120 billion maturing in 2049 or later will be kept permanently to back banknotes. A further £222 billion due to mature by 2034 will be held to maturity, while £146 billion with maturities between 2035 and 2049 will be sold.

That equates to £20 billion of sales a year and an average annual unwind of £46 billion including maturing bonds — slower than over the past 12 months but broadly in line with what investors polled by the Bank in July had forecast for 2026/27.

British government bond yields fell by 6 to 8 basis points after the announcement. "This should help ease some of the upward pressure on UK bond yields as the Bank reduces the amount of government debt being returned to the market," said KPMG chief economist Yael Selfin. "However, a sustained fall in borrowing costs is likely to depend on confidence in the UK's fiscal outlook, and broader global factors, rather than on monetary policy alone."

The Bank bought £895 billion ($1.2 trillion) of sterling debt — almost all government bonds — between 2009 and 2021 through successive quantitative easing programmes aimed at boosting the economy and holding down longer-term interest rates. It stopped reinvesting maturing bond proceeds in February 2022 and began outright gilt sales in September 2022, lifting the pace of quantitative tightening to £100 billion a year. Last September the Monetary Policy Committee voted to slow that pace to £70 billion, and on Thursday it voted 9-0 in favour of the new plan.

All sales will be paused until April while the Bank consults the government on selling gilts directly to the finance ministry's Debt Management Office at market prices, rather than running its own auctions. The shift could help avoid poor prices for small residual amounts of gilt. The Bank has been unique among major central banks in conducting outright sales of government debt rather than waiting for holdings to mature, reflecting the longer average maturity of gilts compared with other countries' debt.

The Bank estimates quantitative tightening has pushed up gilt yields by around a quarter of a percentage point, which it views as small given the surge in bond yields in recent years. Some analysts put the impact closer to three-quarters of a percentage point for 30-year gilts — more than the current gap between British and US 30-year borrowing costs.