Market insights
Recent rate movements
The gilts yield curve has changed shape differently across the three horizons. Using the 2Y as the short rate and the 30Y as the long rate, the Spread Change is calculated as (30Y change) minus (2Y change).
- Past day: Spread Change = (-3.19) - (-4.54) = +1.34 bps, a STEEPENING move. Both yields fell, but the 2Y yield dropped more than the 30Y, slightly widening the spread.
- Past month: Spread Change = (-5.70) - (+7.06) = -12.76 bps, a FLATTENING move. The 2Y yield rose by 7.06 bps while the 30Y yield fell by 5.70 bps.
- Past year: Spread Change = (+53.82) - (+101.52) = -47.69 bps, a FLATTENING move. Both yields rose, but the 2Y yield increased by roughly 1.9 times the 30Y increase.
Over the past month and past year, the curve has flattened, meaning the short end has repriced more strongly than the long end. Because the 2Y tenor is closely linked to near-term policy rate expectations, this pattern is consistent with rising short-term rate expectations outpacing changes in longer-term expectations. Over the past year, yields rose across all tenors, with the 30Y up about 54 bps, which indicates higher borrowing costs for long-dated government debt. The one-day steepening of 1.34 bps is small and does not alter the broader trend. Overall, the data show a curve that has flattened over the medium and longer horizons, with the front end driving most of the movement.
Spread to the fitted curve
The spread of the T26A (0 3/8% Treasury Gilt 2026) to the interpolated curve yield stood at 147.7 bps on 16 October 2026. This is well above the upper anomaly threshold of 37.7 bps, and the 12-month distribution has a standard deviation of about 19 bps, so the reading is a clear outlier against its own recent history. A positive spread means the bond's yield sits above the yield implied by the surrounding curve, so the bond is trading cheap relative to nearby tenors.
The move was abrupt. Over the past day, the spread rose from -108.5 bps to +147.7 bps, a change of roughly 256 bps. Over the past month, it moved from about -3 bps to +147.7 bps, a rise of roughly 151 bps. Over the past year, it moved from about 6 bps to +147.7 bps, a rise of roughly 142 bps. In the preceding weeks the spread had been mostly negative, with several sharp single-day swings, including readings near -145 bps on 14 October 2026.
The bond matures on 22 October 2026, only six days after the observation date. Its yield-to-curve comparison therefore relies on a very short remaining life, which makes the spread particularly sensitive to small price movements and to how the curve is interpolated between neighbouring tenors. The reading is a factual deviation from the bond's own history and should be interpreted in light of this short residual maturity.