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The Bank of England has dropped plans to sell down its stock of long-dated bonds next week in response to recent market turmoil and will instead sell shorter maturity gilts, a move that will ease pressure on the UK’s long-term borrowing costs.
The announcement on Thursday follows a sharp sell-off in the price of UK sovereign bonds with 10- and 30-year maturities in the wake of US President Donald Trump’s jarring imposition of global tariffs.
“The sources of selling pressure were largely in the US with a spillover here in the UK,” said Sarah Breeden, BoE deputy governor with responsibility for financial stability.
She said the shift to selling bonds with shorter maturities was not related to the bank’s inflation-fighting monetary policy stance, which it implements primarily by changing the bank rate.
Breeden played down the likelihood of the BoE stopping its bond sales or switching to buying bonds in response to increases in the UK’s long-term borrowing costs when these were caused by events in the US.
“It is not obvious when the pressure is coming from the US market for us to intervene in the gilt market,” she said during an online panel hosted by MNI, a market news and data provider.
The BoE said it made the decision to sell £750mn of short-dated bonds at its April 14 auction — instead of £600mn of long-dated bonds — “in light of recent market volatility”, adding that it “intends to reschedule the long-maturity auction to the following quarter”.
The central bank added that it planned to keep reducing the bonds it held in its £622.5bn asset purchase facility “as evenly as possible across maturity sectors”.
The BoE bought large amounts of gilts through the facility during previous moments of market stress. It has been selling off the assets since 2022 in a process known as quantitative tightening (QT).
The unusual shift in the BoE’s QT plan followed a jump in long-term borrowing costs for the UK government in response to the trade war unleashed by Trump last week.
“Given recent market volatility, we made a precautionary operational decision to switch the ordering of our QT operations,” said the BoE. “We are not changing the size or pace of the wider QT programme.”
Yields on 30-year gilts climbed 0.28 percentage points to just over 5.63 per cent in the early afternoon of Wednesday, exceeding an earlier multi-decade high set in January to trade at levels last seen in 1998.
The move came before Trump revealed a 90-day pause on aggressive tariffs he had imposed on US trading partners above his global 10 per cent baseline levy. The US president has retained punitive tariffs on China as well as the baseline.
The chief investment officer at a large UK pension said the BoE had been in touch with market participants on Wednesday.
On Thursday, yields on 30-year gilts fell back to 5.42 per cent, while the yield on the 10-year gilt retreated 0.16 percentage points to 4.66 per cent, as global bonds rallied.
While gilt yields have mainly been driven by the US Treasury market in recent days, some investors worry about the amount of debt the UK will issue this year, and analysts welcomed the BoE’s decision to shorten the maturity of its debt sales.
Peter Schaffrik, chief European macro strategist at RBC Capital Markets, said the move should not be billed as “an emergency measure”, but rather as “a sensible reaction to the volatility that we’ve seen”.
“It seems opportune not to add any supply to the part of the curve that’s a bit stressed anyway,” he added.
