1) Recent Rates Movements
The UK gilts yield curve has exhibited distinct movements across different time horizons, with varying directional changes and shape adjustments.
- Past day: The curve experienced a flattening move with the spread change of +0.90bps (30Y: +1.32bps minus 2Y: +0.42bps), as yields rose across all maturities but with smaller increases at the long end.
- Past month: A significant flattening occurred with a spread change of -7.86bps (30Y: -7.35bps minus 2Y: +0.52bps), driven by declining long-term yields while short-term rates remained relatively stable.
- Past year: The curve demonstrated substantial steepening with a spread change of +83.39bps (30Y: +26.87bps minus 2Y: -56.51bps), reflecting a dramatic divergence between falling short-term and rising long-term yields.
These movements reflect evolving market expectations regarding monetary policy and economic conditions. The past year's steepening suggests markets have priced in expectations of policy easing at the short end while maintaining concerns about longer-term inflation or fiscal sustainability, typical during periods of economic uncertainty. The past month's flattening indicates a shift in sentiment, possibly reflecting changing expectations about the pace of monetary policy adjustments or improved confidence in long-term economic stability. The recent daily flattening, though modest, continues this trend of convergence between short and long-term rates, suggesting markets may be reassessing the duration and magnitude of the current interest rate cycle.