Yield curve moves - 10th February 2026

The yield curve. Talk of the gilt yield curve steepening as political turmoil grows – some important context.

The fallout from the Epstein papers is having global impacts, from Norwegian royalty to the steepening of the UK yield curve, if the media are to be believed. There is no disputing the former. And, indeed, if the yield curve steepness is defined as the difference between the ten-year and two-year gilt yields, then the yield curve is at its steepest since 2018. However, below, we have added some important context:

• 2018 was still part of the ultra-low interest rate era – base rate was 0.5% at the start of the year and 0.75% by the end. While the Bank of England was not expanding its gilt holdings under quantitative easing programme in 2018, neither was it running them down at the rate of £70bn a year under quantitative tightening, as it is now. 

• As the graph shows, longer term gilts yields have moved little from their level at the end of 2024. The main steepening of the yield curve has come from lower yields at the short end of the market, as the Bank of England has cut the Bank Rate from 5.5% in August 2024 to 3.75% now (and a probable 3.5% in March). The curve will automatically steepen unless long term yields fall as quickly as their short term counterparts. That is unlikely to happen as the two ends of the curve have economic different drivers. 

• The demand for long dated bonds has faded because what were once their biggest buyers, defined benefit pension schemes, have little fresh money to invest.  

Source: Techlink Professional. This is a news bulletin and is up-to-date as of the date of publishing. Please check the publishing date at the top of the article.