Our latest monthly commentary for investing in UK gilts. Includes latest gilts UK news. Update on latest gilt yields. Changes in Gilt yield curve. Gilts auction results. Gilts ETF flows. For UK financial advisers.
Investing in Gilts: key trends in the UK gilts market
Subscribe to our weekly newsletter to get all our insights to your inbox (for UK financial advisers only)
In our monthly commentary on the UK gilts market, we focus on three key aspects:
Near-term Direct Gilts Ladder
The near-term direct gilts ladder shows the yield to maturity and coupon rates and is available to our clients.
For the 0.125% Treasury Gilt 30-Jan-26 (T26), Yield to Maturity was 3.349% at end May 2025, compared to 3.150% at end April 2025. For UK advisers wanting the full gilts ladder including Gross Comparable Yield for higher and additional rate taxpayers, please contact us as this is only available to our clients. Changes to the Yield Curve
The chart below shows changes to the UK yield curve over the last 3 and 12 months.
Over the past three months, the 10-year Gilts yield increased from 4.48% to 4.65%, while the 2-year yield dropped from 4.17% to 4.02%. This divergence suggests that investors expect near-term rate cuts from the Bank of England, driving short-term yields lower, while longer-term concerns about sticky inflation and government borrowing have kept upward pressure on 10-year yields. UK Yield Curve
Real yields
We look at real 10 year yields which adjust 10 year nominal yield for (10 year) break-even inflation expectations as a measure of whether bonds are preserving capital on inflation-adjusted terms on a forward-looking basis.
The nominal yield on 10-year UK government bonds has risen significantly from near-zero levels in early 2021. As of end of May 2025, the 10-year gilt yield stood at 4.65%, up from 4.48% in April 2025. This increase reflects continued upward pressure on yields over the past quarter. Yields peaked at 4.87% in January 2025, marking a three-year high. Real yields remain positive, meaning that after accounting for inflation expectations, investors continue to earn inflation-adjusted real returns on 10-year UK government bonds. UK nominal vs real yields
DMO Auction Results
From a supply/demand perspective, the UK DMO completed the following auctions last month with Bid-to-Cover ratio of 2.58x to 3.48x.
Bid-to-Cover ratio higher than 2.5 indicates strong demand for Gilts. It means bids were 2.5 times the amount of bonds offered. This suggests investor confidence and successful auctions. 
From a flows perspective, UK Gilts ETF’s experienced cumulative YTD flows of £344m, concentrated in short-dated exposures.
Summary
Near-term Direct Gilts are a tax-efficient alternative to cash deposits for higher and additional rate taxpayers.
Longer-dated gilt yields reflect the market’s view on the credibility of the UK governments borrowing and spending plans. Notes
Yield at Average Accepted Price (AAP) refers to the yield of an investment, calculated using the average price at which the investment was accepted, rather than the current market price. (Source: DMO)
Bid to Cover ratio is a key indicator of demand for government debt at auction, is calculated by dividing the total amount of bids received by the amount offered at a gilt auction. (Source: DMO) Comments are closed.
|
ELSTON RESEARCHinsights inform solutions Categories
All
Archives
January 2026
|
RSS Feed
|
Company
|
Our Solutions
|
|