The U.K.’s Kinky Curve

The current yield on 50-year gilts stands at 1.40%, about 10bps below that of the 30-year gilt at 1.49%.

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This condition has prevailed for quite a while now (the yellow line is the yield curve one year ago; the green line is the yield curve now):

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Whereas an inverted yield curve is often cited as a predictor of an impending recession, a longer-term look shows that the U.K.’s 30-year bond (green line below) tends to have a higher yield than the 50-year (blue line below) the majority of the time. In fact, the spread between the two (purple line below) only seems to turn negative during periods of heightened uncertainty for financial markets (2009, 2012/13):

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The differentials between 20-year, as well as 25-year, gilts show a similar story with the shorter-maturity bonds often yielding close to or more than the 50-year:

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The only other country with its longest-dated government debt yielding less than shorter maturities? Greece.

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Certainly, no one is implying that the U.K.’s economic situation is anywhere near as precarious as that of Greece. We just wanted to point out a peculiar oddity of which we were not previously aware, whatever the investment implications may be.