1) Recent Rates Movements
The UK gilts yield curve has shown distinct movements across different time periods:
- Past day: The curve experienced a mild flattening as yields declined across all tenors, with the spread change calculation (30Y minus 2Y) at -2.7bps, as the 30Y yield fell by -3.4bps while the 2Y yield decreased by -0.8bps.
- Past month: A notable steepening movement occurred with the spread change at +13.8bps, as the 30Y yield increased by +18.5bps compared to a more modest +4.7bps rise in the 2Y yield.
- Past year: A significant steepening trend emerged with the spread change at +104.6bps, characterized by a -23.9bps decline in the 2Y yield contrasting with a substantial +80.7bps increase in the 30Y yield.
These yield curve movements reflect evolving economic conditions:
- The daily flattening suggests short-term market adjustments with a uniform downward pressure across the curve.
- The monthly steepening indicates growing term premium demands from investors, potentially reflecting heightened inflation expectations for longer-dated securities.
- The yearly steepening, particularly pronounced with the short-end decline and long-end rise, points to a significant shift in the market's long-term interest rate expectations and term premium requirements.