Market insights
Recent rate movements
The gilts yield curve has exhibited consistent flattening across all periods under review, as evidenced by spread calculations between the 30Y and 2Y tenors.
- Past day: Spread Change = (-6.39) - (+0.46) = -6.85bps, indicating flattening. The 2Y yield rose marginally by 0.46bps while longer tenors declined, with the 30Y falling by 6.39bps and the 20Y by 6.01bps.
- Past month: Spread Change = (+0.45) - (+16.57) = -16.12bps, confirming flattening. Short-end yields rose sharply, with the 2Y up 16.57bps and the 5Y up 19.75bps, while the 30Y remained nearly flat at +0.45bps.
- Past year: Spread Change = (+40.17) - (+82.77) = -42.60bps, representing the most pronounced flattening. The 2Y surged 82.77bps compared to a more modest 40.17bps rise in the 30Y.
This sustained flattening pattern across the past day, past month, and past year reflects a consistent repricing dynamic where short-term yields have risen more than long-term yields, or in the case of the daily move, long-term yields have fallen while short-term yields remained stable. This behaviour is typically associated with monetary policy tightening expectations, as short-end rates are more sensitive to central bank rate decisions. The persistent narrowing of the 2Y-30Y spread over the past year suggests markets have progressively priced in higher near-term interest rates relative to long-term expectations, a pattern consistent with tighter monetary conditions being reflected more acutely at the short end of the curve.
Spread to the 2-year
Over the past 2 week(s), the 5Y spread to 2Y (defined as the 5Y yield minus the 2Y yield) has exhibited an upward trend. As the spread is positive this means the spread has been been widening, with the 5Y yield increasing relative to the 2Y yield. The increasing 5Y to 2Y spread suggests that the yield curve is steepening.