1) Recent Rates Movements
The gilts yield curve has exhibited distinct shape changes across different time horizons, with varying degrees of steepening and flattening movements.
- Past day: The curve steepened by 0.87 bps as the 30Y yield rose 0.87 bps while the 2Y yield remained virtually unchanged (-0.01 bps), with notable volatility in the 20Y tenor declining 0.30 bps.
- Past month: A significant steepening of 5.11 bps occurred, driven by the 30Y yield increasing 2.86 bps against a 2Y yield decline of 2.25 bps, creating a pronounced shift in curve shape.
- Past year: The most dramatic steepening of 64.83 bps materialized, with 30Y yields advancing 27.14 bps while 2Y yields plummeted 37.70 bps, representing a substantial structural change in the yield curve.
The consistent steepening pattern across all periods reflects a clear trend of diverging short and long-term interest rate expectations.
- Past day: The modest steepening suggests limited immediate market stress, though the 20Y tenor's decline indicates some intermediate-term positioning adjustments.
- Past month: The steepening reflects growing differentiation between short-term monetary policy expectations and longer-term economic outlook, with declining short-end yields potentially signaling dovish policy expectations.
- Past year: The substantial steepening indicates a fundamental shift in market expectations, with sharply lower short-term rates suggesting significant monetary easing while rising long-term yields may reflect concerns about fiscal sustainability or long-term inflation expectations.