Bank of England revises QT impact on gilt yields upward, but the effect remains surprisingly small

The Bank of England now believes its multi-year campaign to shrink its balance sheet has pushed 10-year gilt yields up by 20 to 30 basis points, a revision from an earlier estimate of 15 to 25 basis points. Deputy Governor Dave Ramsden laid out the updated figures during the July 2026 Monetary Policy Report press conference, while noting that pinning down QT’s precise contribution to yield movements is still more art than science.

To put that in perspective: gilt yields have risen by roughly 350 basis points since QT began in February 2022. The Bank is essentially saying its balance sheet unwinding accounts for somewhere between 6% and 9% of that total move.

What the numbers actually show

The BoE launched QT in early 2022, first by halting reinvestments of maturing securities and then pivoting to active gilt sales later that year.

For the year ending September 2026, the Monetary Policy Committee set a target of reducing the gilt stock by £70B. That’s a notable step down from the £100B reduction target in the prior period.

Of that £70B figure, active sales accounted for £21B. The remaining reduction came from bonds simply maturing and rolling off the balance sheet.

Ramsden emphasized that QT functions as a “backdrop” to monetary policy rather than the main event. The Bank Rate, held steady at 3.75% after a 6-3 MPC vote in July, remains the primary lever for steering economic conditions.

Why isolating QT’s impact is so difficult

The upward revision from 15-25 basis points to 20-30 basis points could reflect either a longer duration of QT providing more data, or simply improved estimation techniques. Ramsden flagged both possibilities.

What this means for bond markets and rates

The reduction from £100B to £70B in the annual gilt stock target also suggests the BoE is conscious of not disrupting market functioning. This careful approach matters, particularly given the institutional memory of autumn 2022, when gilt market dysfunction forced the Bank into emergency interventions that briefly paused the entire QT project.

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