BoE Halts Long-Dated Gilt Sales and Rewrites QE Unwind Plan
The Bank of England paused sales of long-dated British government bonds for six months. It plans to offload £488 billion in gilts by 2034.
The Bank of England halted sales of long-dated British government bonds immediately. The central bank paused all gilt sales for the next six months. It announced a multi-year programme to offload most of its remaining £488 billion in holdings by 2034. This decision follows a period of significant market volatility.
British 30-year borrowing costs hit their highest level since 1998 just days before the announcement. This spike occurred during a global bond selloff. Governor Andrew Bailey stated that the Monetary Policy Committee decided to withhold a substantial part of the gilt stock from sale. The remainder will be unwound over the next eight years.
Bond Yields React Sharply
Longer-dated British government bond prices rallied sharply after the announcement. Yields on 30-year gilts are on track for their biggest one-day gain since April. This move pushed yields down to a three-week low. Investors welcomed the clarity provided by the new policy framework.
Central Bank Denies Market Panic
Governor Bailey denied that the change was a response to deteriorating market conditions. He said the Bank began working on the revamp before the U.S.-Iran conflict in February. The central bank argues that changing the pace of sales affects the timing of losses, not the total size. Critics argue the policy crystallises losses ultimately underwritten by taxpayers.
Historical Context of Purchases
The Bank of England bought £895 billion of sterling debt between 2009 and 2012. Almost all of these purchases were government bonds. This quantitative easing programme expanded the central bank's balance sheet significantly. The current plan aims to reduce these holdings to a minimum over time.
According to GN auto markets/bonds: bond yields, the market reaction was immediate. The shift in policy provides a structured timeline for the exit from quantitative easing. This approach seeks to balance fiscal stability with monetary policy objectives. The next few years will define the pace of this reduction.
