1) Recent Rates Movements
The gilts yield curve has experienced distinct movements across different time horizons, with varying degrees of steepening observed in each period.
- Past day: The curve exhibited a steepening move with a spread change of +1.56bps (30Y rising 3.81bps vs 2Y rising 2.25bps), as longer-dated yields increased more than shorter maturities.
- Past month: A pronounced steepening occurred with a spread change of +6.35bps (30Y up 6.65bps vs 2Y up 0.30bps), reflecting significantly larger increases in long-end yields compared to minimal movement in short-term rates.
- Past year: The most dramatic steepening was recorded with a spread change of +64.76bps (30Y up 27.82bps vs 2Y down 36.94bps), driven by falling short-term yields contrasting sharply with rising long-term yields.
The consistent steepening pattern across all three periods reflects divergent monetary policy expectations and economic conditions impacting different segments of the yield curve.
- Past day: The modest steepening suggests market participants are pricing in slightly higher long-term growth or inflation expectations relative to near-term policy rates.
- Past month: The more pronounced steepening indicates growing differentiation between short-term policy expectations and longer-term economic fundamentals, with investors demanding higher compensation for duration risk.
- Past year: The substantial steepening, particularly with declining 2-year yields alongside rising 30-year yields, suggests markets have priced in expectations of monetary policy easing while maintaining concerns about long-term fiscal sustainability or structural inflation pressures affecting the long end of the curve.