Bank of England Cancels Long-Term Gilt Sale Plan

On September 17, the Bank of England announced the cancellation of its plan to sell long-term gilts, marking a significant adjustment to its quantitative tightening strategy. The plan involves a portfolio of £488 billion, which is expected to be gradually unwound by September 2034. According to a proposal that has yet to be finalized, the central bank will hold £120 billion in gilts maturing in 2049 or later, aligning them with future currency issuance. Additionally, £222 billion in gilts maturing before 2035 will be gradually unwound, while the remaining £146 billion will be sold at a rate of £20 billion per year between 2035 and 2049, potentially sold directly to the government through the Debt Management Office. Bank of England Governor Bailey stated in a letter to the Chancellor that this arrangement "maintains the independence of monetary policy" and aims to "maximize the effectiveness of funding by minimizing costs and risks." During negotiations with the UK Debt Management Office regarding the terms of sale, all planned quantitative tightening auctions will be paused until April next year to avoid competition with government gilt issuance and alleviate short-term pressure on gilt yields.

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