BOE Unveils Plan to Unwind £488 Billion Government Bond Portfolio

The Bank of England has outlined its long-term plan to unwind its £488 billion portfolio of government bonds, acquired through quantitative easing programs. The central bank will pause sales for six months and halt long-dated gilt sales entirely.

BOE Governor Andrew Bailey emphasized the goal is to reduce interest-rate risk on the BOE's balance sheet, which has increased due to holding long-dated gilts. Changing the pace of gilt sales affects the timing of losses to the government rather than their total size, according to Bailey.

The BOE will allow £222 billion of gilts maturing by 2034 to mature and sell £146 billion in remaining gilts over eight years. It will retain £120 billion in long-dated gilts to back its banknotes. The central bank has been selling gilts since September 2022, but the new plan marks a slower pace of £20 billion per year, compared to £70 billion previously.