The Bank of England has published a new estimate for the impact of quantitative tightening (QT) on 10-year gilt yields, revising its previous, more modest figures. Initially, in September 2022, market participants estimated QT's impact to be between 14–35 basis points (bps), while the Bank's own estimates, communicated later by Dave Ramsden, were a more conservative 0–10 bps.

Following a series of publications and gentle critiques from outlets like Alphaville, the Bank's latest estimate suggests a cumulative increase in 10-year gilt yields of 20–30 bps. While still potentially lower than some academic studies, this new figure aligns more closely with the midpoint of market expectations from its 2022 survey. This revision brings the Bank's assessment closer to the 'wisdom of crowds'.

The potential fiscal cost to HM Treasury due to these higher yields, compared to the Bank's initial estimates, is an estimated £3.4bn for the fiscal period 2023-24 through 2026-27. However, the article notes that this cost might be offset by other factors, such as lower Bank Rate obligations or potential boosts to the economy and tax receipts. The long-term impact of QT on term premia is also considered, with potential for fading over time.