United Kingdom Government Bonds - Yields Curve (2024)

FAQs

What is the shape of the yield curve in the UK? ›

Current analysis: Yield Curve is inverted in Long-Term vs Short-Term Maturities. United Kingdom Central Bank Rate stands at 5.00%, following the most recent adjustment in August 2024. According to Standard & Poor's agency, the United Kingdom credit rating is AA.

The UK 10 Year Gilt Bond Yield is expected to trade at 3.98 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate it to trade at 3.91 in 12 months time.

The 'yield curve' is often used as a shorthand expression for the yield curve for government bonds. To graph the yield curve, the yield is calculated for all government bonds at each term to maturity remaining. For example, the yield on all government bonds with one year remaining until maturity is calculated.

We expect UK bonds to deliver annualised² returns of around 4.4%-5.4% over the next decade, compared with the 0.8%-1.8% 10-year annualised returns we expected at the end of 2021, before the rate-hiking cycle began.

An inverted yield curve is unusual; a normal yield curve slopes upward, displaying yields that run from low to high as maturities increase. The inverted curve reflects bond investors' expectations for a decline in longer-term interest rates, a view typically associated with recessions.

By contrast, Treasury notes and bonds are issued with longer terms to maturity of between 2- and 10-years and 10- and 30-years, respectively. The shape of the yield curve refers to the relative difference, or “spread,” between longer-term and shorter-term yields.

Range: 4.15 to 4.3.

The current yield has a fairly easy equation: simply divide the bond's annual interest payment by its current market price. For example, if a bond pays £50 in interest each year and its current market price is £1,000, the current yield is 5% (because £50 divided by £1,000 equals 0.05, or 5%).

Reading yield curve charts

A normal yield curve slopes upward, meaning the interest rate on shorter-dated bonds is lower than the rate on longer-dated bonds. This compensates the holder of long-term bonds for the time value of money and for any potential risk that the bond issuer might default.

What is the bond yield curve right now? ›

A normal yield curve shows low yields for shorter-maturity bonds increasing for bonds with a longer maturity. The curve slopes upward. This indicates that yields on longer-term bonds continue to rise, responding to periods of economic expansion.

A gilt is a UK Government liability denominated in sterling, issued by HM Treasury and listed on the London Stock Exchange.

The UK Government has a “AA”/AA/Aa3 credit rating from major credit rating agencies, reflecting its strong financial position and ability to repay its debts. This means that investors in UK Treasury bills are very likely to receive the amount they invested, along with the agreed-upon yield, at maturity.

The normal yield curve is a yield curve in which short-term debt instruments have a lower yield than long-term debt instruments of the same credit quality. This gives the yield curve an upward slope. This is the most often seen yield curve shape, and it's sometimes referred to as the "positive yield curve."

One notable change is that the shape of the Treasury yield curve, which has been in an inverted state since 2022. This unusual occurrence represents an environment where yields on shorter-term Treasuries are higher than those for longer-term Treasuries.

Yield. Yield right of way signs are triangular and have a red border on a white background. A yield sign means you must reduce speed when approaching an intersection.

When it is flat, this usually means investors don't expect much change in interest rates, and a two-year bond could pay the same return as a 30-year bond. This isn't a positive outlook. A flattening yield curve hints that investors are worried about the economy's direction and are expecting a slowdown.