1) Recent Rates Movements
The gilts yield curve has experienced distinct movements across different time horizons, with varying impacts on curve shape.
- Past day: The spread change of +3.94bps (30Y: -0.85bps minus 2Y: -4.78bps) indicates a steepening move, as longer-dated yields declined less than shorter-dated yields amid broad-based rate decreases.
- Past month: A flattening pattern emerged with a spread change of -0.66bps (30Y: -30.94bps minus 2Y: -30.27bps), as yields fell across all maturities with slightly larger declines in intermediate tenors reaching -37bps for both 5Y and 10Y gilts.
- Past year: The curve steepened significantly with a spread change of +7.52bps (30Y: +35.33bps minus 2Y: +27.82bps), reflecting a broad-based rise in yields with longer maturities experiencing greater increases.
These curve dynamics reflect evolving market expectations regarding monetary policy and economic conditions. The past day's steepening suggests potential shifts in near-term rate expectations, while the past month's flattening amid declining yields indicates possible dovish monetary policy expectations or economic growth concerns. The past year's substantial steepening, with all yields rising but longer-term rates increasing more significantly, typically reflects higher inflation expectations and stronger economic growth prospects that have influenced long-term borrowing costs more than short-term policy rate expectations.