1) Recent Rates Movements
The UK gilts yield curve has exhibited consistent steepening movements across all analyzed periods, with the most pronounced changes occurring over the past year.
- Past day: The spread change calculation shows (+0.52) - (-1.61) = +2.13bps, indicating a steepening move as short-term yields fell more significantly than long-term yields rose
- Past month: A more substantial steepening occurred with spread change of (+1.71) - (-11.21) = +12.92bps, driven by sharp declines in 2-year yields while 30-year yields increased modestly
- Past year: The most dramatic steepening materialized with spread change of (+3.71) - (-58.92) = +62.63bps, reflecting substantial compression in short-term rates contrasted with slight increases in long-term yields
The consistent steepening pattern across all timeframes suggests a fundamental shift in market expectations regarding monetary policy and economic conditions. The substantial decline in short-term yields, particularly evident over the past year with 2-year gilts falling nearly 59bps, typically reflects expectations of lower policy rates and potentially weaker near-term economic growth prospects. Conversely, the resilience or modest increases in long-term yields indicate that inflation expectations and long-term growth assumptions remain relatively stable. This yield curve behavior is characteristic of markets anticipating monetary easing cycles, where central bank policy rates are expected to decline more than long-term fundamental economic conditions would warrant changes in longer-dated securities.