Bank of England outlines gilt unwinding plan: £20bn annual sales, potential government purchase model
The Bank of England's MPC decided to unwind £488bn of gilts held in the Asset Purchase Facility over a multi-year period at £20bn annually. The Bank is reviewing a model to sell £146bn of medium-dated gilts (2035–2049) to HM Treasury via the DMO at market prices, with implementation decision expected by April 2027.
How Oyticker scores a story: impact and confidence describe the information, not a probability that a price moves.
What happened
On 16 September 2026, the MPC set a multi-year path to reduce APF gilt holdings to zero through £20bn annual sales plus maturing gilts. The Bank will retain £222bn of gilts maturing before 2035 to maturity, £120bn of longest-dated gilts to back banknote issuance, and is reviewing a sale model for £146bn of gilts maturing 2035–2049. Under the proposed model, the DMO would purchase these gilts at market prices in a pre-announced, pre-defined manner at £20bn annually, concluding around 2034. Bank APF auctions are paused pending review completion by April 2027.
Why it matters
This formalizes quantitative tightening (QT) and signals a shift from active market sales to a government-intermediated purchase mechanism, reducing direct BoE selling pressure on gilts. The model transfers duration risk from the BoE to HM Treasury's balance sheet, potentially affecting gilt supply dynamics, financing costs, and the transmission of monetary policy through asset prices and term premia.
Market transmission
First-order: reduced BoE gilt supply to secondary markets; potential reduction in gilt volatility if government purchases absorb sales. Second-order: HM Treasury's financing remit expands to absorb £146bn of gilts; gilt yields and curve shape depend on DMO's funding strategy and market perception of fiscal sustainability; sterling rates and gilt-equity relative valuations adjust to reflect lower central-bank demand and higher government debt holdings; potential spillover to credit spreads if fiscal concerns emerge.
What to watch
BoE's final decision by April 2027 on the government purchase model; DMO's incorporation of gilt purchases into its 2027–28 financing remit; gilt auction dynamics and yield curve response post-announcement; HM Treasury's debt management communications; any MPC guidance on pause/reversal triggers (inflation, financial stability); sterling and gilt volatility indices.
Source:Bank of England — Market notices
Oyticker provides market information and analysis for educational purposes. It is not investment advice: you remain responsible for your own decisions.