UK gilt yields drop as BoE pauses long-term bond sales and keeps rates steady
The Bank of England left its policy rate unchanged and announced an end to planned long-term gilt sales, prompting yields on both short- and long-dated government bonds to fall.
On Thursday the Bank of England’s Monetary Policy Committee voted unanimously to leave the base rate at 3.75%, despite three members urging a 25-basis-point increase. In the same meeting the central bank unveiled a major revision to its quantitative-tightening strategy, announcing that it will cease all planned sales of long-term gilts and instead retain them on its balance sheet until maturity, with any future disposal to be handled directly by the Treasury.
The market reaction was immediate: the two-year gilt yield fell eight basis points and the 10-year benchmark dropped nine basis points, while the 30-year gilt saw a decline of up to 12 basis points. Analysts said the reduced supply outlook eased pressure on long-dated bonds. Governor Andrew Bailey noted a material rise in energy costs since July and cautioned that a prolonged Middle-East conflict could force tighter policy later. Dissent within the committee was limited to three members, including chief economist Huw Pill, while deputy governor Claire Lombardelli did not join the dissenters, keeping the vote split unchanged from July.
Why it matters
The policy shift lowers UK borrowing costs and signals a more cautious approach to tightening amid inflation and geopolitical risks.
How the sides frame it
HIGH AGREEMENTBoth camps report the BoE’s pause of long-term gilt sales and steady rates, but the left-leaning coverage emphasizes the Treasury-direct sale proposal and its potential to ease borrowing costs, while the right-leaning coverage highlights the unanimous rate decision, dissenting members, and the immediate yield drops.
LEFT
Frames the story around the BoE’s plan to sell gilts directly to the Treasury and pause quantitative tightening, suggesting it could modestly lower borrowing costs.
RIGHT
Frames the story around the BoE’s unanimous decision to keep rates steady, the internal dissent on a rate hike, and the market’s quick yield declines.
The left emphasises
- direct gilt sales to Treasury
- pause QT pending Treasury’s decision
- could modestly lower borrowing costs
The right emphasises
- unanimous base-rate decision at 3.75%
- three members urging a 25-basis-point increase
- yields fell sharply across the curve
How this story developed
- Sep 3 Coventry Building Society to Raise Fixed Mortgage Rates for All Customers Starting Monday
- Sep 8 Average fixed‑rate mortgage figures have risen to 5.63% (two‑year) and 5.68% (five‑year) while house‑price growth turned negative in August.
- Sep 11 July 2026 data show the UK economy grew by 0.4%, beating expectations of no change, driven mainly by services and AI-related activity.
- Sep 11 Andy Burnham entered No 10 on 20 July.
- Sep 16 The Bank of England is expected to keep its policy rate at 3.75% on Thursday, but a sharp rise in gas and oil prices is prompting talk of a possible increase later this year.
- Sep 17 The Bank of England kept the Bank Rate at 3.75% after a 6‑3 vote.
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