1) Recent Rates Movements
The UK gilts yield curve has exhibited distinct movement patterns across different timeframes, with varying degrees of flattening and steepening dynamics.
- Past day: The curve experienced a flattening move with a spread change of -2.77bps (30Y +1.75bps minus 2Y +4.52bps), as short-end yields rose more aggressively than long-end rates, with the 5Y tenor showing the largest increase at +4.71bps.
- Past month: A modest steepening occurred with a spread change of -1.38bps (30Y +0.34bps minus 2Y +1.72bps), though the movement was relatively contained across the curve with mixed directional changes in intermediate tenors.
- Past year: The curve demonstrated significant steepening with a spread change of +64.51bps (30Y +13.28bps minus 2Y -51.24bps), reflecting a dramatic divergence between short and long-end movements.
The contrasting curve dynamics across these periods reflect different underlying economic pressures and market expectations.
- Past day: The flattening pattern suggests potential near-term policy tightening concerns or short-term liquidity factors driving up front-end rates more than long-term expectations.
- Past month: The minimal steepening indicates relatively stable market conditions with modest adjustments to term structure expectations.
- Past year: The substantial steepening, driven by falling short-term rates and rising long-term yields, typically reflects expectations of monetary policy easing in the near term while maintaining concerns about longer-term inflation or fiscal sustainability, creating a more normalized upward-sloping yield curve structure.