Global Rates Notes BoE Announce Gilt Friendly QT Plan

Economics Research 17 September 2026 | 9:05PM BST

Global Rates Notes: BoE Announce Gilt-Friendly QT Plan

n The BoE have proposed a plan to continue to shrink the bank’s Gilt holdings, but George Cole | will no longer be conducting active sales to the private sector. APF Gilt sales are Goldman Sachs International on pause until a final decision on the plan is made in April, with the current plan Loic Mathys proposing that future sales of £20bn will be from the BoE to the Government. | Goldman Sachs International n Gilt holdings are planned to fall from £488bn to £120bn, with all long-dated Gilts Simon Freycenet retained on the BoE’s balance sheet to indirectly back banknote issuance. | Goldman Sachs Bank Europe SE - Paris n This is a positive for long-end Gilts, compressing risk premium. The initial move Branch has priced relief, but we see more room for Gilts to richen on asset swap. We estimate that the end of sales to the private sector is worth around 4bp on Gilt swap spreads.

At today’s BoE meeting, the MPC announced a multi-year plan to reduce the stock of gilts held for monetary policy purposes to zero by 2034, but which also stopped active Gilt sales for the time being. Gilts rallied on the news, with 30y Gilt yields 13bp lower, and the 2s30s curve 8bp flatter - a response we think justified by the new outlook for Gilt sales (Exhibit 1).

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Goldman Sachs Global Rates Notes

Exhibit 1: 30y Gilts rallied and swap spreads widened on Exhibit 2: Redemption schedule for bonds under passive the BoE’s announcement runoff plan Intraday 30y CMT Gilts vs 30y OIS-Gilts

% bp £bn £bn 30y Gilts 30y Swap Spreads (RHS, inverted) Total Nominal Total Purchase Proceeds BoE announcement -

- :15 09:00 09:45 10:30 11:15 12:00 12:45 13:30 14:15 15:00 15:45 16:

Source: Goldman Sachs Global Investment Research, Bloomberg Source: Goldman Sachs Global Investment Research, BoE

The key features of the plan include:

n A pause to APF sales until the final decision on the plan is made, due by April 2027. n The overall stock of APF Gilt holdings (currently £488bn) will be reduced by £368bn by 2034, at an average pace of £46bn per year. n £120bn of the APF holdings will be retained on the BoE balance sheet, and will be used to back banknote issuance. These will be the longest maturity Gilts, namely 22 years or longer. n The £222bn of shorter maturity Gilts will be held to maturity, at which point they will run off the balance sheet passively. Exhibit 2 shows the redemption schedule of these holdings. n The remaining £146bn of 8-22y maturity Gilts will be sold to the Government, rather than the private market via APF auctions, at a pace of £20bn/year.

Although there was some reporting that the sale of long-end Gilts was under review ahead of this QT decision, we see the pausing of APF auctions, the cessation of long-end sales and the eventual ending of sales to the private sector as a positive for the Gilt market.

We expect that these BoE sales / DMO purchases will imply an increase in the cash requirement to pay for the bonds, given that cash raised via bond issuance is offset against the acquisition of a bond. This will not affect the overall level of debt, given changes to the cash requirement will eventually show up in issuance. This is not going to alter the indemnity payments of the UK Treasury to the BoE, as these sales will be conducted at market rates.