BOE's £368 Billion Gilt Unwind Puts Bitcoin on Eight-Year Rates Test

The Bank of England has announced plans to unwind £368 billion in monetary-policy gilts by September 2034. This move is expected to tighten financial conditions, despite the initial market response indicating easier conditions in long-dated UK debt.

The BOE's plan involves allowing gilt maturities and active sales to reduce the portfolio at an average rate of £46 billion per year. Additionally, the Bank will pause APF auctions pending a review scheduled for April 2027. The decision was made after a vote by the Monetary Policy Committee, with six members keeping Bank Rate at 3.75%.

The BOE estimates that quantitative tightening has added 20 to 30 basis points to long-term gilt term premia since 2022. This effect is seen as modest compared to other factors influencing gilt yields, including global uncertainty and structural changes in UK demand.

Bitcoin's price has not yet reacted significantly to the announcement, trading near $78,000 on Friday. However, experts warn that the long-run tightening test could eventually impact global yields and risk appetite, potentially affecting Bitcoin's liquidity, adoption, and fundraising efforts.