Ramsden details BoE plan to end QT by 2034 with £20bn of gilt sales a year
Victoria Shinder2 min readBank of England Deputy Governor Dave Ramsden has walked through the Monetary Policy Committee's September decision to move quantitative tightening from annual targets to a multi-year path, in a speech at the Bank on 28 September co-hosted by the Money, Macro and Finance Society.
The starting point is the stock of gilts in the Asset Purchase Facility, about £488 billion, down from a peak of £895 billion. Since February 2022, Ramsden said, about £259 billion of gilts have matured, £129 billion have been sold and about £20 billion of corporate bonds have been sold or have matured. Under the new plan, £120 billion of the longest-dated gilts will stay in the facility to back current and future banknote issuance. Of the remaining £368 billion, the MPC unanimously agreed an average unwind pace of £46 billion a year, finishing by the end of 2034: £222 billion of gilts maturing before 2035 will be held to maturity and £146 billion of 2035 to 2049 gilts will be sold at a constant £20 billion a year. The last to mature is the £28.2 billion September 2034 gilt.
The Bank intends, subject to agreement with the Treasury, to sell those gilts to the government rather than to the market. Under that model the Debt Management Office would buy them over time at market prices on a pre-set, non-discretionary schedule and pass them to the National Loans Fund for cancellation and refinancing. The Bank will announce how it will implement the sales by April 2027. The pace would be reconsidered only if Bank Rate alone were judged insufficient to meet the inflation target, or in a second, market-related circumstance.
Ramsden said the reaction to the announcement was a fall in yields across the curve, larger at the long end: 30-year and 10-year gilt yields fell by around 10 basis points, with term premia down around 7 basis points, while the effect at the short end was smaller and later reversed. He read that as a sign the market had expected more QT.
What it means
A fixed pace and a known end date turn QT from an annual event into background supply that can be priced once. The open question is the sales route: sending £146 billion to the government instead of the market removes the Bank as a second seller of gilts, but it needs a Treasury agreement that has not yet been signed.