PWLB briefing
End of Day Wrap-Up
UK gilt yields rose sharply across the curve today, but PWLB rates ended lower, reflecting a notable divergence between market yields and borrowing costs for local authorities.
GILT MOVE SUMMARY
- → 1y: 4.460% (+11bp) — front-end led the move higher.
- → 10y: 4.974% (+8bp) — belly followed with significant gains.
- → 20y: 5.562% (+10bp) — long-dated yields also rose notably.
- → 50y: 5.168% (+9bp) — gains extended across the ultra-long end.
PWLB CLOSE SNAPSHOT
| Tenor | Rate | Change |
|---|---|---|
| 1y | 5.22% | -2bp |
| 5y | 5.44% | -1bp |
| 10y | 5.89% | -2bp |
| 25y | 6.47% | -2bp |
| 50y | 6.27% | -3bp |
WHAT DROVE TODAY
The sharp rise in gilt yields followed a weak 10-year gilt auction (4.91% vs previous 4.58%) and softer-than-expected UK PMI data: Services PMI actual 51.2 (forecast 52.8, previous 53.9), Composite PMI actual 51.0 (forecast 52.8, previous 53.7). News coverage focused on the economic impact of the Iran conflict, with surging oil prices and official statements from the Chancellor and Bank of England highlighting inflation risks and the potential for significant economic challenges. However, the divergence between rising gilt yields and falling PWLB rates suggests other technical or administrative factors influenced the PWLB fixings, as there is no direct evidence in the news or data explaining the move lower in PWLB rates.
WHAT THIS MEANS
- → Despite a marked increase in gilt yields, PWLB maturity rates ended the day lower across the curve.
- → Local authority borrowing costs via PWLB fell by up to -3bp, with the largest decline at 50 years.
- → The disconnect between market yields and PWLB rates is unusual and not explained by available public information.
NEXT ON THE DIARY
- → 07:00: GBP PPI Input (MoM) — Forecast: 0.50% (MEDIUM)
- → 07:00: GBP CPI (YoY) — Forecast: 3.0% (HIGH)
- → 07:00: GBP CPI (MoM) — Forecast: 0.40% (MEDIUM)
Markets will be watching tomorrow's inflation data for further direction.
This commentary is for information only and does not constitute financial advice. Always verify rates directly with PWLB or official sources before making borrowing decisions.