Bank of England Sets £20bn Gilt Sales Target — But Pauses Its Regular Auctions to Rethink How

The Bank of England confirmed this week that it will sell £20 billion of government bonds a year from its own holdings between October 2026 and September 2027, as part of the multi-year process of unwinding the quantitative easing programmes it ran between 2009 and 2022. The headline number matters less than what it actually applies to — because the far bigger story in this announcement is how little of the Bank's remaining gilt stock is being actively sold at all.

Of the roughly £488 billion the Bank still held in its Asset Purchase Facility heading into this year, the overwhelming majority is staying put. £222 billion of gilts maturing before 2035 will be retained and simply allowed to mature naturally, generating no active sales whatsoever. A further £120 billion of the very longest-dated gilts in the portfolio — including part of its holding of the 1.75% 2049 gilt and everything maturing after it — will also be held to maturity, specifically because the Bank uses these holdings to indirectly back current and future banknote issuance.

That leaves £146 billion of gilts maturing between 2035 and 2049 as the actual target of the Bank's active reduction programme, sold at the confirmed pace of £20 billion a year — a schedule that, at that rate, concludes roughly around the same time the shorter-dated holdings finish maturing naturally in 2034.

The more operationally significant development, and one that goes well beyond a simple sales-target update, is how the Bank now intends to sell that remaining £146 billion. Its regular quarterly open-market gilt auctions — the mechanism it has used for active sales since QT began — have been paused entirely while the Bank Executive reviews a fundamentally different model: selling gilts directly to HM Treasury, rather than into the open market to private investors. Under this proposed approach, the Treasury would instruct the Debt Management Office to purchase the gilts the Bank is selling, at market prices, on a pre-announced schedule set by the Bank. No long-dated gilt auctions were held in the third quarter of 2026, an early practical sign of this pause already in effect.

The Bank has said it will review progress on this proposed model before April 2027, with implementation, subject to a final decision to proceed, potentially folded into the DMO's own annual financing remit as set by the Treasury. Until that review concludes, the mechanism for actually delivering the £20 billion annual sales target remains genuinely unsettled — confirmed in scale, but not yet confirmed in method.

This year's total balance sheet reduction, combining the £20 billion in active sales with gilts maturing naturally, averages out to roughly £46 billion — a meaningfully smaller pace than the £70 billion target the Bank set for the prior twelve months, continuing a multi-year pattern of the annual reduction pace gradually slowing as the total stock of holdings shrinks. At its peak in early 2022, following more than a decade of quantitative easing rounds dating back to the 2009 financial crisis, the Asset Purchase Facility's gilt holdings reached almost £895 billion.

The rationale behind retaining rather than selling the shorter-dated £222bn tranche connects to how the Bank now runs its day-to-day monetary operations. Holding a stable core of gilts to maturity, rather than actively trading them out, supports the reserves buffer the banking system relies on under the Bank's current operating framework, reducing the risk that an aggressive, indiscriminate sell-down of holdings destabilises short-term money markets in the process of reducing the Bank's balance sheet.

For anyone tracking the UK gilt market specifically, the practical takeaway is that this announcement changes less about near-term supply pressure than the headline £20bn figure might suggest — since active sales are concentrated in a fairly narrow slice of long-dated maturities, and even that mechanism is currently paused pending further review rather than actively adding to market supply right now. The more consequential number for anyone watching gilt yields week to week remains HM Treasury's own gross issuance through the Debt Management Office's regular auction calendar, which dwarfs the Bank's own sales programme in scale and continues regardless of how the Bank's review concludes.