Bank of England's government bond decision may lead to a 4 billion funding shortfall for the Chancellor of the Exchequer.

If the Bank of England stops actively selling government bonds in this week's key decision, UK Chancellor Rishi Sunak will need to raise an additional 4 billion to maintain the budget plan on track. In addition to Thursday's interest rate decision, the Bank of England will also announce the specific steps to reduce its quantitative easing bond portfolio over the next 12 months, which could pose a serious challenge for Sunak as he prepares to release the budget on November 26. The decision to slow down the pace of selling government bonds will increase the burden on UK taxpayers, as the bonds held by the Bank of England are currently in a loss-making position. This is a major blow for Sunak, who already needs to raise as much as 35 billion in funds due to rising borrowing costs, weak growth prospects, and a series of policy U-turns that have depleted fiscal buffers. The Bank of England is currently facing a dilemma: weighing the fiscal costs of slowing down government bond sales while also considering the risk of asking investors to buy bonds on a large scale, which could exacerbate financial market instability. The 30-year UK government bond yield has reached its highest level since 1998 this month.