Bank of England to unwind £368 billion in gilts by September 2034

The Bank of England plans to remove £368 billion of gilts by September 2034, following the separation of £120 billion of longer-dated gilts for banknote backing. The Monetary Policy Committee will reduce the remaining stock by an average of £46 billion annually through maturities and £20 billion in active sales. This quantitative tightening shifts bonds from the central bank to private investors, potentially increasing yields on long-dated debt. The Bank Rate remains at 3.75%, with some members advocating for a rise to 4%. Active sales will begin with fewer auctions as the Bank reviews arrangements with HM Treasury and the Debt Management Office, with operational details expected by April 2027. The planned sales pace aligns with recent practices, with £21 billion sold over the past year. The 10-year gilt yield fell over 7 basis points, while the 30-year yield dropped nearly 10 basis points. The BOE estimates the cumulative effect of quantitative tightening on long-term gilt term premia to be modest, accounting for 20 to 30 basis points of a 200-basis-point rise since 2022. Bitcoin traded near 78000 dollars, reflecting broader rates and risk appetite dynamics, although the immediate market reaction to the BOE's announcement remains unclear.

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