1) Recent Rates Movements
The gilts yield curve has exhibited a consistent flattening trend across all observed periods, driven by short-term yields rising more than (or falling less than) long-term yields.
- Past day: Spread Change = (-1.31) - (0.79) = -2.09bps, indicating a FLATTENING move. The 2Y yield rose by approximately 0.79bps while the 30Y yield fell by 1.31bps, with intermediate tenors (5Y, 10Y, 20Y) also declining.
- Past month: Spread Change = (18.63) - (19.53) = -0.90bps, indicating a FLATTENING move. Both the 2Y and 30Y yields rose substantially, but the shorter tenor increased marginally more than the longer tenor.
- Past year: Spread Change = (24.75) - (48.38) = -23.63bps, indicating a pronounced FLATTENING move. The 2Y yield rose by 48.38bps, nearly double the 30Y yield increase of 24.75bps, reflecting a significant narrowing of the long-short spread.
This sustained flattening across the past day, past month, and past year suggests that short-term rates have been more sensitive to monetary policy expectations than long-term rates. Front-end yields typically reflect near-term interest rate expectations set by central bank policy, while long-end yields incorporate longer-term growth and inflation expectations. The disproportionate rise in short-term yields relative to long-term yields, particularly evident over the past year, is consistent with tightening monetary conditions or expectations of near-term rate increases that have not been matched by equivalent shifts in long-term inflation or growth expectations. The continuation of this flattening bias into the past month and past day, albeit at a more moderate pace, indicates the trend has persisted rather than reversed.