Bank of England slows pace of bond rundown, keeps rates steady

Core Viewpoint - The Bank of England (BoE) has decided to slow down its quantitative tightening (QT) program, reducing the pace of government bond sales to minimize market volatility while maintaining its monetary policy objectives [1][4]. Group 1: Bond Sales and Market Impact - The BoE will reduce its bond sales to 70 billion pounds from 100 billion pounds over the past year, with a target to lower its bond holdings to 488 billion pounds by October 2026 [2][3]. - The decision reflects a split among policymakers, with a 7-2 vote indicating differing opinions on the pace of QT [4]. - The sales will be allocated 40% to short-dated, 40% to medium-dated, and 20% to long-dated gilts, based on their initial purchase price [5]. Group 2: Economic Context and Future Implications - The BoE's bond purchases totaled 875 billion pounds ($1.19 trillion) from 2009 to 2021 to stimulate the economy, with QT beginning in 2022 [2]. - Long-dated gilt yields have reached a 27-year high, complicating fiscal planning for the government [6]. - The QT slowdown is aimed at restoring room for future monetary stimulus and reducing market distortions [4].