1) Recent Rates Movements
The UK gilts yield curve has exhibited distinct movement patterns across different timeframes, with the most pronounced changes occurring in longer-dated maturities.
- Past day: The curve experienced a flattening move with spread change of -1.74bps (30Y: -1.96bps vs 2Y: -0.22bps), as yields declined across all maturities with the largest decreases in the 10-year sector at -2.75bps.
- Past month: A significant steepening occurred with spread change of +15.13bps (30Y: +12.61bps vs 2Y: -2.52bps), driven by rising long-end yields while short-end rates fell, creating a pronounced bear steepening pattern.
- Past year: The curve demonstrated substantial steepening with spread change of +77.22bps (30Y: +36.42bps vs 2Y: -40.80bps), reflecting divergent monetary policy expectations and term premium adjustments.
These curve dynamics reflect evolving market expectations regarding monetary policy and economic conditions. The past day's flattening suggests temporary risk-off sentiment or dovish policy expectations, while the past month's steepening indicates markets pricing in persistent inflationary pressures requiring sustained higher rates at the long end despite potential near-term policy easing. The past year's dramatic steepening, with short rates falling 40.8bps while long rates rose 36.4bps, demonstrates the market's adjustment to changing inflation expectations and fiscal policy concerns. This pattern typically reflects expectations of economic resilience requiring higher long-term borrowing costs while short-term policy rates remain accommodative, suggesting markets anticipate a complex monetary policy environment with diverging short and long-term rate trajectories.