United Kingdom sovereign yield curve
UK Gilts (GBP) — full term structure, 2s10s and 3m10y spreads, NY Fed recession probability, Nelson-Siegel-Svensson fit.
Data as of May 15, 2026Term structure
| Tenor | 3M | 6M | 1Y | 2Y | 3Y | 5Y | 7Y | 10Y | 20Y | 30Y |
|---|---|---|---|---|---|---|---|---|---|---|
| Yield (%) | 4.51 | 4.57 | 4.67 | 4.88 | 5.09 | 5.52 | 5.36 | 5.11 | 5.03 | 4.94 |
Term structure with NSS fit
Observed yields (markers) overlaid with the Nelson-Siegel-Svensson smoothed fit (orange).
Dashed line = current policy rate (4.00%).2s10s spread (5-year history)
Shaded red zones = inverted curve (2s10s < 0). Inversion has historically preceded recession with 6-24 month lead time.Recession probability — 12 months ahead
Estrella-Mishkin probit (NY Fed): P(recession) = Φ(-0.5333 - 0.6629 × spread3m10y).
Nelson-Siegel-Svensson parameters
Fit residual RMSE: 0.109 pp. See the NSS methodology page for the parametric form.
| β₀ | β₁ | β₂ | β₃ | λ₁ | λ₂ |
|---|---|---|---|---|---|
| 4.431 | -0.099 | 0.687 | 2.617 | 1.50 | 5.00 |
How to read this country's curve
Look first at the 10-year yield in the headline tiles above — that is the benchmark long-term borrowing cost for United Kingdom (GBP). Then compare it to the policy rate set by the central bank. If the 10-year is meaningfully above the policy rate, investors expect rates to stay supportive of growth; if it sits below, the market is pricing rate cuts ahead.
Next, check the 2s10s and 3m10y spread tiles. Green numbers mean the curve is sloping up in the normal way (longer bonds yield more). Red numbers mean the curve is inverted — long bonds yield less than short bonds, which historically precedes a slowdown. The deeper the inversion, the stronger the warning signal, although the lag between inversion and recession typically runs 12-24 months.
Finally, the recession probability at the top combines the 3m10y spread with the NY Fed's statistical model. A reading above 30% is the conventional caution threshold; above 50% historically meant a recession was the base case within a year. For non-US countries this is a useful comparative signal but the exact level should be read with care.
Interpreting the NSS parameters for this country
The four estimated betas decompose the curve into orthogonal factors. β₀ (4.431) is the long-run level — the asymptotic yield as maturity goes to infinity, interpretable as the market's terminal nominal anchor (steady-state real rate plus expected inflation). β₁ (-0.099) is the slope factor; a negative β₁ produces an upward-sloping curve while a positive β₁ flattens or inverts the front end. β₂ (0.687) and β₃ (2.617) govern two curvature humps controlled respectively by λ₁ = 1.50 and λ₂ = 5.00 years — the maturities at which each curvature factor peaks. Diebold-Li (2006) show β₀+β₁ converges to the instantaneous short rate and β₀ to the consol yield, providing direct factor-model intuition.
On the recession probability for United Kingdom: the 17.6% reading uses the Estrella-Mishkin (1998) coefficients calibrated on US post-war NBER data. For developed-market peers (Eurozone, UK, Canada, Australia, Switzerland) the cross-country mapping is broadly defensible, but the absolute level is indicative, not literal — local probit re-estimation (Moneta 2005 for the euro area; Chinn-Kucko 2015 for OECD comparators) typically yields slightly weaker, but still significant, predictive coefficients. For United Kingdom specifically the reading is best treated as a relative-rank signal across our nine-country set rather than an unconditional probability.
A final caveat: the spread input embeds both an expected-policy component and a term-premium component. When the ACM term premium is compressed by structural demand for duration (LDI flows, central-bank balance-sheet residuals, foreign reserve recycling), an inverted curve can flag elevated probability without indicating that aggressive easing is priced. Cross-checking the model against survey-based policy expectations and against the country's own forward OIS curve disciplines the signal.
What the Gilt curve is signalling
The UK Gilt curve sits between the US and the Eurozone in terms of stress: with the Bank of England Bank Rate at 4.00%, the 3-month bill yields around 4.10% and the 10-year Gilt is at roughly 4.35%. The 2s10s is positive but narrow, while the 3m10y is essentially flat. The long end (20-30Y) trades in the 4.70-4.80% area — a meaningful term premium reflecting the UK’s long-duration pension demand combined with concerns about persistent inflation.
Inversion status and term spreads
The 3m10y spread is borderline. After a deep inversion through 2022-2024, the curve normalised in 2025 but has flattened again into 2026 as the BoE has held rates higher than markets expected. The Estrella-Mishkin recession-probability mapping puts the UK at an elevated reading — second-highest among the nine countries we cover — though still well below the level that historically signalled imminent recession in UK data.
What the curve says about BoE expectations vs market pricing
The Gilt curve’s shape suggests:
- Markets are pricing roughly 40-50 bp of cuts from the BoE over the next 12 months — fewer than for the Fed.
- The 5-7 year area at around 4.10-4.20% reflects a market view that the long-run neutral rate for the UK is somewhat higher than the Eurozone, consistent with structurally higher UK inflation expectations.
- The steep 10s30s slope (around 45 bp) is one of the largest in the developed world and reflects the UK’s idiosyncratic long-end pricing dynamics — the 2022 LDI crisis showed how thin this market can be.
Nelson-Siegel-Svensson fit
The Gilt curve’s combination of front-end stickiness, mid-curve flatness, and steep long end gives the NSS model meaningful work to do. The two-lambda Svensson extension is essential for capturing the long-end steepening that a plain Nelson-Siegel three-factor model cannot reproduce. The fit’s residuals are within a few basis points across all observed tenors. See the NSS methodology page for parameter interpretation.
Cross-references
- Bank of England overview — Bank Rate, MPC vote breakdown, meeting schedule.
- Real interest rate tracker — UK real rate vs. peers.
- Recession probability dashboard — UK probability in cross-country context.
- Nelson-Siegel-Svensson methodology — full derivation.