1) Recent Rates Movements
The UK gilts yield curve has experienced mixed directional movements across different timeframes, with notable shape changes driven by varying magnitudes of yield adjustments across maturities.
- Past day: The curve experienced a flattening move with a spread change of +0.68bps (30Y: +2.67bps minus 2Y: +1.99bps), as yields rose across all tenors but with smaller increases at the long end.
- Past month: A steepening occurred with a spread change of -8.78bps (30Y: -12.53bps minus 2Y: -3.75bps), as yields declined broadly but with significantly larger decreases in longer-dated gilts.
- Past year: The curve demonstrated substantial steepening with a spread change of +62.88bps (30Y: -1.37bps minus 2Y: -64.25bps), reflecting dramatically larger yield declines in shorter maturities compared to the long end.
These curve dynamics reflect evolving market expectations regarding monetary policy and economic conditions. The past day's flattening suggests modest tightening in long-term conditions relative to short-term rates, while the past month's steepening indicates greater easing expectations embedded in longer-dated securities. The pronounced steepening over the past year demonstrates a significant shift in the interest rate environment, with short-term rates experiencing substantial declines of over 64bps while 30-year yields remained relatively stable. This pattern typically reflects expectations of lower policy rates in the near term while longer-term inflation and growth expectations remain more anchored, creating a steeper yield curve that suggests markets anticipate economic conditions requiring more accommodative monetary policy at shorter horizons.