1) Recent Rates Movements
The UK gilts yield curve has exhibited distinct movements across different timeframes, with notable variations in curve shape dynamics.
- Past day: The curve experienced a flattening move with a spread change of -3.39bps ((-3.05) - (+0.34)), as 2-year yields rose marginally by 0.34bps while 30-year yields declined by 3.05bps, creating downward pressure across longer maturities.
- Past month: A significant steepening occurred with a spread change of +19.40bps ((+19.90) - (+0.51)), driven by modest increases in 2-year yields of 0.51bps contrasted with substantial rises in 30-year yields of 19.90bps, indicating broad-based selling pressure in longer-dated gilts.
- Past year: The curve demonstrated pronounced steepening with a spread change of +73.09bps ((+32.74) - (-40.34)), as 2-year yields fell sharply by 40.34bps while 30-year yields increased by 32.74bps, reflecting divergent monetary policy expectations and term premium adjustments.
These curve movements reflect evolving market perceptions of monetary policy and economic conditions. The past day's flattening suggests short-term policy rate expectations remained stable while longer-term rates declined, potentially indicating reduced inflation concerns or growth expectations. The past month's steepening pattern, with pronounced increases in longer maturities, typically signals rising term premiums or inflation expectations for the longer term. Over the past year, the dramatic steepening reflects the significant repricing of short-term policy expectations, with the substantial decline in 2-year yields suggesting expectations of lower policy rates, while rising long-term yields indicate persistent concerns about fiscal sustainability or structural inflation pressures affecting the longer end of the curve.