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2026-09-17 21:36:10
[Bank of England Announces New Plan to Slow Down Government Bond Sales, UK Bond Yields Fall] ⑴ Following the Bank of England's announcement of a plan to slow the sale of government bonds, borrowing costs for the UK government fell, and yields on both short-term and long-term bonds declined. ⑵ The 10-year government bond yield fell by about 6 basis points to around 5.23%, retreating from a 19-year high reached earlier this week. ⑶ The 30-year government bond yield fell by about 7 basis points to around 5.79%, after hitting its highest level since 1997 a few days earlier. ⑷ Investors may feel reassured as the Bank of England prefers to sell some of its bonds back to the government rather than dump them on the bond market. ⑸ If ministers agree to this proposal, it will alleviate pressure on bond yields and reduce losses borne by taxpayers. ⑹ The Bank of England is considering selling some UK government bonds back to the UK government and has revealed that it has had "in-depth discussions" on this matter, but no final decision has been made yet. (7) The Bank of England plans to sell approximately £146 billion in government bonds as part of quantitative tightening, with the remaining approximately £222 billion to be reduced passively, i.e., awaiting maturity. (8) The Monetary Policy Committee decided to reduce the quantitative tightening program at an average annual rate of approximately £46 billion by the end of 2034, including approximately £20 billion in sales and approximately £26 billion in maturing government bonds annually. (9) This is lower than the previous rate of approximately £70 billion in quantitative tightening per year, and the slowdown is slightly greater than market expectations, which had previously anticipated a slowdown to approximately £50 billion. (10) This decision was made against the backdrop of criticism that quantitative tightening has increased government borrowing costs and that losses from the Bank of England's bond sales are borne by taxpayers. (11) The Bank of England currently holds approximately £488 billion in government bonds through its asset purchase program, has decided to allocate approximately £120 billion in bonds to support paper money issuance, and will reduce the remaining approximately £368 billion by the end of 2034. 12 The Bank of England also warned that inflation will rise for the remainder of this year and into early 2027.
