Bank of England to unwind APF gilt holdings with planned asset sales
The Bank of England has published a Market Notice detailing how it will unwind the gilt holdings it uses for monetary policy through the Asset Purchase Facility (APF). The plan includes annual sales aimed at reducing these holdings to zero, while the Bank will retain certain gilts to maturity. The notice also notes pauses in APF auctions during the review of the selling model.
What is changing
The MPC set a path to reduce the stock of UK government bonds bought for monetary policy through the APF. The Bank plans annual gilt sales of 20 billion pounds, together with the natural maturing of existing gilts, to reach a balance of zero in the APF over time. In this Market Notice, the Bank says it will pause APF auctions temporarily while it reviews its selling model.
Key facts you should know
Two notable details: (1) The Bank will keep 222 billion pounds of gilts that mature before 2035 in the APF to maturity, rather than selling them now. (2) It will retain 120 billion pounds of the longest-dated gilts and hold them to maturity for policy purposes. The plan reflects a staged approach to reduce the APF stock, while preserving some longer-term gilts until they mature.
Who is affected
Participants in gilt markets, including pension funds, insurers, and other investors who hold government bonds or rely on gilt benchmarks, may experience changes in supply and price reactions as the Bank reduces APF holdings. The pause in APF auctions could temporarily affect liquidity in certain gilt segments while the selling model is reviewed.
Practical next steps
For households and investors: monitor gilt yields and fund performance if you hold UK government bonds or gilt-based investments. For market participants: prepare for phased gilt supply changes and potential shifts in liquidity around APF auctions. The Bank notes a pause during the model review, so watchers should look for further updates on auction timing and the selling method once the review concludes.
Limits and questions
The Market Notice explains the Bank’s intended path but does not guarantee exact timings beyond the stated annual 20 billion pound selling pace. It also emphasizes retention of specific gilts to maturity, which means not all APF gilts will be sold immediately. If you seek more detail, follow Bank of England market notices and updates on the APF and gilt operations.
Which sources did Setup in Bahrain review?
Setup in Bahrain reviewed the following source material before preparing this explanatory article.
The links remain visible so readers can inspect the evidence, compare dates and context, and confirm current requirements with the relevant authority.
- bankofengland.co.uk — evidence source reviewed for this article.
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