1) Recent Rates Movements
Over the past day, the UK gilt yield curve moved lower across all tenors, with the 2Y falling by -4.83bps and the 30Y by -3.74bps, producing a Spread Change of +1.10bps (30Y change minus 2Y change), indicating a marginal steepening as short-dated yields declined more than long-dated yields. Over the past month, yields rose broadly, with the 2Y up 12.56bps and the 30Y up 14.29bps, giving a Spread Change of +1.74bps, also a modest steepening, as the long end outpaced the short end despite the 5Y tenor recording the largest monthly increase (+16.28bps). Over the past year, the curve has shifted upward significantly, with the 2Y climbing 50.09bps while the 30Y rose only 38.76bps, resulting in a Spread Change of -11.32bps, confirming a clear flattening as short-term rates increased at a faster pace than long-term rates.
These movements point to distinct dynamics across horizons. The daily steepening reflects a mild reduction in near-term rate expectations relative to long-term yields. The monthly steepening, though limited, suggests a slight upward repricing of long-term growth or inflation expectations relative to short-term policy rate expectations. The year-long flattening trend, however, is more consistent with markets pricing in tighter monetary policy or elevated short-term rate expectations, likely tied to persistent inflation concerns, while long-term yields rose less, reflecting relatively contained long-run inflation or growth expectations. Together, these shifts illustrate a curve that has flattened materially over the year even as it has experienced short-lived steepening episodes in the most recent month and day.