The Bank of England has unveiled its detailed schedule for the sale of gilts held within its Asset Purchase Facility (APF) for the second quarter of 2026. The announcement, made via a Market Notice on 20 March 2026, outlines the central bank's plans to continue the process of quantitative tightening (QT), gradually unwinding the extensive bond-buying programme initiated during previous economic crises.
These sales represent a further step in the Bank's strategy to normalise its balance sheet, which expanded significantly during the global financial crisis and the COVID-19 pandemic. The APF was established to conduct asset purchases, primarily of UK government bonds (gilts), with the aim of lowering long-term interest rates and injecting liquidity into the financial system to stimulate economic activity. As inflation has become a more pressing concern and the economy has recovered, the focus has shifted towards reducing this monetary stimulus.
The specific timings and volumes of the gilt sales for Q2 2026 will be closely watched by market participants. The Bank typically seeks to conduct these sales in a predictable and transparent manner to minimise disruption to the gilt market. Previous rounds of sales have involved both conventional gilts and index-linked gilts, with the Bank often adjusting its approach based on prevailing market conditions and liquidity.
For UK investors and pension holders, the ongoing gilt sales contribute to the broader market environment. As the Bank sells gilts, it increases the supply of these bonds in the market. All else being equal, an increased supply can put upward pressure on gilt yields, which reflect the return on government debt. Higher gilt yields can have implications for the valuation of other assets, including corporate bonds and equities, and can influence the discount rates used by pension funds to value their liabilities.
While the Bank's objective is to manage these sales without causing undue market volatility, the cumulative effect of quantitative tightening over several quarters is a significant shift in monetary policy. This contrasts sharply with the era of quantitative easing, where the Bank was a net buyer of gilts. The transition reflects the Bank of England's assessment of the current economic landscape and its commitment to bringing inflation back to its 2% target.
Economists and market analysts will be scrutinising the impact of these sales on gilt yields and the wider financial system. The Bank's careful communication and structured approach are designed to provide clarity and predictability, allowing market participants to adjust their portfolios accordingly as the UK's monetary policy continues its evolution.
Source: Bank of England