Overview
- On Thursday the Bank of England voted to redesign quantitative tightening, pausing gilt auctions for six months and stopping sales of long‑dated bonds while setting a pathway to shrink its holdings by 2034.
- The BoE divided the remaining £488bn of gilts into three buckets: £222bn to roll off as they mature, £146bn to be actively sold at about £20bn a year, and £120bn of long‑dated gilts to be retained to back banknotes.
- The Monetary Policy Committee held the Bank Rate at 3.75% with a split vote of six to three and said the new QT plan reduces the average annual unwind to roughly £46bn including maturities.
- Markets reacted with a rally in UK government bonds, falls in long‑term yields including 30‑year gilts, and a slightly weaker pound, while investors flagged relief for pension funds and insurers that own long‑dated assets.
- The BoE will consult the Treasury on selling stock directly to the Debt Management Office, keep auctions paused until the review due before April 2027, and faces renewed scrutiny over how QT timing affects central‑bank losses and taxpayer exposure.