Rates

US Rates Rise Slightly, With The Largest Increase In The Belly Of The Curve

University of Michigan data showed high confidence in economic recovery and lower than expected inflation expectations; short-term inflation pricing has dropped drastically since the start of June, with the 6-Month CPI swap falling 65bp from 4.56% to 3.91%

Published ET

US Yield Curve Spreads | Sources: ϕpost, Refinitiv

US Yield Curve Spreads | Sources: ϕpost, Refinitiv

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QUICK US SUMMARY

  • Yield curve steepening, with the 1Y-10Y spread widening 1.7 bp on the day, now at 140.6 bp (YTD change: +60.1)
  • 1Y: 0.0480% (unchanged)
  • 2Y: 0.1490% (up 0.2 bp)
  • 5Y: 0.7436% (up 2.7 bp)
  • 7Y: 1.1469% (up 2.3 bp)
  • 10Y: 1.4535% (up 1.7 bp)
  • 30Y: 2.1421% (up 1.2 bp)
  • US treasury curve spreads: 2-5 at 59.5bp (up 2.5bp today), 5-10 at 71.0bp (down -1.1bp today), 10-30 at 68.9bp (down -0.5bp today)
  • Treasuries butterfly spreads: 2x5x10 at 11.5bp (down -3.8bp today), 5x10X30 at -2.9bp (up 0.1bp today)

US MACRO RELEASES

  • 1 Year Inflation Expectations (median), preliminary for Jun 2021 (UMICH, Survey) at 4.00
  • University of Michigan, Current Conditions Index-prelim, Volume Index for Jun 2021 (UMICH, Survey) at 90.60, below consensus estimate of 92.30
  • University of Michigan, Total-prelim, Change Y/Y for Jun 2021 (UMICH, Survey) at 2.80
  • University of Michigan, Total-prelim, Volume Index for Jun 2021 (UMICH, Survey) at 83.80, above consensus estimate of 79.00
  • University of Michigan, Total-prelim, Volume Index for Jun 2021 (UMICH, Survey) at 86.40, above consensus estimate of 84.00

WEEKLY CFTC SPECULATIVE POSITIONING

  • Specs reduced their duration significantly this week
  • Asset managers on the other hand increased duration, with a focus on longer-dated underlying

5s, 10s intraday Yields | Sources: ϕpost, Refinitiv US rates spreads | Sources: ϕpost, Refinitiv2X5X10 Butterfly | Sources: ϕpost, Refinitiv

US FORWARD RATES

  • 3-month USD Libor 5 years forward down 3.0 bp
  • US Treasury 1-year zero-coupon rate 5 years forward up 2.0 bp, now at 2.0624% (meaning that short-term rates are expected to increase by 199.0 bp over the next 5 years)
Implied Rate Hikes | Sources: ϕpost, RefinitivImplied Yields on Fed Funds Futures | Sources: ϕpost, RefinitivEurodollar Implied Yield | Sources: ϕpost, RefinitivUS 2-10Y Forward Curve | Sources: ϕpost, Refinitiv

US INFLATION

  • TIPS 1Y breakeven inflation at 3.17% (down -5.5bp); 2Y at 2.72% (down -7.7bp); 5Y at 3.55% (up 103.7bp); 10Y at 2.32% (down -1.1bp); 30Y at 2.32% (up 0.3bp)
  • 6-month spot US CPI swap down -30.7 bp to 3.912%, with a flattening of the forward curve
Sources: ϕpost, RefinitivSources: ϕpost, Refinitiv

RATES VOLATILITY & LIQUIDITY

  • USD swap rate implied volatility (USD 1 Month by 1 Year ATM Swaption) up 3.1% at 74.3%
  • 3-Month LIBOR-OIS spread up 1.5 bp at 7.0 bp (12-months range: 5.5-26.2 bp)
MOVE Indices | Sources: ϕpost, RefinitivSources: ϕpost, Refinitiv

KEY INTERNATIONAL RATES

  • Germany 5Y: -0.635% (down -0.7 bp); the German 1Y-10Y curve is 1.4 bp flatter at 38.7bp (YTD change: +23.8 bp)
  • Japan 5Y: -0.121% (down -0.5 bp); the Japanese 1Y-10Y curve is 1.6 bp flatter at 15.0bp (YTD change: +0.7 bp)
  • China 5Y: 2.982% (up 0.8 bp); the Chinese 1Y-10Y curve is 2.1 bp steeper at 71.5bp (YTD change: +25.1 bp)
  • Switzerland 5Y: -0.555% (down -4.8 bp); the Swiss 1Y-10Y curve is 6.9 bp flatter at 53.8bp (YTD change: +27.4 bp)
Sovereign spreads | Sources: ϕpost, RefinitivImplied hikes | Sources: ϕpost, Refinitiv