Bank of England Poised to Slow Bond Sales to £50 Billion Pace, Survey Shows

The Bank of England is expected to slow the pace of its balance sheet reduction to £50 billion ($67 billion) in the 12-month period ending September 2027, according to a survey of market participants. This marks a decrease from the £70 billion pace of bond portfolio reduction in the current 12-month cycle.

Survey Details

The findings, which were released Friday, were unchanged from the central bank's previous Market Participants Survey conducted in June, suggesting stable expectations among financial professionals. The survey gauges sentiment on the future of the Bank of England's monetary policy, specifically its quantitative tightening (QT) program.

Respondents also provided expectations on the composition of future gilt sales, projecting a focus on shorter- and medium-term debt:

• 43.3% of sales are expected in gilts with a 3-7 year maturity.
• 41.1% are anticipated in gilts with a 7-20 year maturity.
• 15.6% are expected in bonds with maturities longer than 20 years.

Policy Context

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Quantitative tightening is the process of unwinding the massive bond purchases, known as quantitative easing (QE), that the central bank undertook to support the economy. Between 2009 and 2021, the Bank of England purchased £875 billion of British government bonds, or gilts.

The bank began shrinking this stockpile in 2022 through a combination of active bond sales and by not reinvesting the proceeds from maturing debt. The total stock of these bonds is projected to fall to £488 billion by September, when the bank's Monetary Policy Committee is scheduled to hold its annual vote on the pace of QT.

Market Impact

A slower pace of QT is generally considered less restrictive for financial conditions, as it reduces the volume of government bonds the market must absorb. This can help ease upward pressure on gilt yields, which influence borrowing costs across the UK economy. The specific maturity breakdown of sales is closely watched by investors as it can directly influence the shape of the yield curve.