Maturity against yield
If we plot maturity against yield for every conventional gilt, and draw a smooth line through them, we get the yield curve. The dots are those gilts. Hover one for its name, coupon, maturity and the amount outstanding. A dot's height is not a price a dealer quoted. It is the yield to maturity as previously explained. Dealt prices of named gilts are not republished here.
The yield curve is one of the central indicators in macroeconomics, and its slope has a long record as a warning. When short yields rise above long yields, recessions have often followed, above all in the United States. It is a tendency, not a clock. An inversion can also mean that inflation is expected to fall, or that investors are paying up for the safety of a long bond. What the picture lets us see, directly, is the price of borrowing at every length the curve covers. The fitted line starts at six months. Bank Rate, set by the Bank of England, is the overnight policy rate the short end is priced against. The five-year point is what a five-year fixed mortgage is priced from. The ten-year and the thirty-year are the cost of lending further out. Whether the line rises or falls is the market's charge for time, which is unpacked on Inside the Yield.
Real yields come from index-linked gilts. Implied inflation is the gap between the nominal and the real curve. It compensates for the Retail Prices Index, not CPI, so it is not "the market's CPI forecast". How the two indices are built is on CPI/RPI. Why a fixed cashflow makes that gap matter is on Expected inflation.
The same nominal curve, back to January 1979, is on Historical yields.
The faint bands are the three stretches of the curve. The Debt Management Office cuts conventional gilts the same way: short, up to 7 years; medium, 7 to 15 years; long, over 15 years. Traders call the medium stretch the belly. The press uses all three names. There is no public table of who holds each maturity. What follows is who the gilts were built for, and who deals in them.
Banks, money-market funds and overseas reserve managers keep cash they may need back. The price moves less than a long gilt, and this is the stretch that sits against Bank Rate, so a change in the policy rate shows up here first. A report about the front end is this part of the curve. A two-year fixed mortgage is priced from the two-year point, and a five-year fix from the five-year point. Savings rates follow it.
Asset managers, overseas private investors and the gilt-edged market makers are the usual presence, and they often set the price on an ordinary day. Hedge funds trade it. The ten-year point is the yield in the headlines: a story about gilt yields, with no maturity named, is usually this number. A sterling company borrows at a margin over the gilt of a similar length, so this is the base of a long corporate loan. It is also the coupon the government locks in when it sells a new ten-year gilt.
Defined-benefit pension funds and insurers are who the long conventional gilts, and the index-linked gilts, were built for. The promises run for decades, and a long gilt lines the income up. They still hold a great deal of the stock. The bid at the margin is thinner than it was, because those schemes have closed and are running off. The press calls it the long end, or the long bond, and often means the thirty-year. When it jumps, the funding of a pension promise moves with it, and so does the price of buying a retirement income. That is what happened in September 2022. The government's cost of borrowing for decades moves too, and reaches the interest bill as those gilts are refinanced.
The stock in total, rather than who lives on each stretch, is on Who owns it.
More on the curve: Inside the Yield takes the ten-year gilt apart, term premium included. Curve dynamics plots the level, the slope and the bend. The UK premium is the gap against the United States and the safest euro governments. A day's move is how much of a change was shared with other markets, and how much was Britain's alone.