US Curve Shifts Down At The Longer End, With The 5-10 Spread Down 5bp

The market is currently pricing in half a rate hike in 2022, evenly split between Q3 and Q4 2022, and 75bp through 2023

Published Jun 17, 2021 5:23 PM ET

Expected Changes in US 1-Year Rate Over The Next 5 Years | Sources: ϕpost, Refinitiv data

Yield curve flattening, with the 1Y-10Y spread tightening -6.7 bp on the day, now at 142.7 bp (YTD change: +62.2)
1Y: 0.0840% (down 0.3 bp)
2Y: 0.2133% (up 0.6 bp)
5Y: 0.8809% (down 1.6 bp)
7Y: 1.2547% (down 4.5 bp)
10Y: 1.5108% (down 7.0 bp)
30Y: 2.0982% (down 11.3 bp)
US treasury curve spreads: 2-5 at 66.8bp (down -2.2bp today), 5-10 at 63.0bp (down -5.2bp today), 10-30 at 58.8bp (down -4.2bp today)
Treasuries butterfly spreads: 2s5s10s at -4.1bp (down -3.0bp today), 5s10s30s at -4.0bp (up 1.4bp today)
Solid $16 5Y TIPS auction, which drew $45.4 B in bids for a 2.67 cove. Indirects takedown at historic high of 87.3%, while primary dealers took in a record low of 4.7% (down from 13.1% in April)

Jobless Claims, National, Continued for W 05 Jun (U.S. Dept. of Labor) at 3.52 Mln, above consensus estimate of 3.43 Mln
Jobless Claims, National, Initial for W 12 Jun (U.S. Dept. of Labor) at 412.00 k, above consensus estimate of 359.00 k
Jobless Claims, National, Initial, four week moving average for W 12 Jun (U.S. Dept. of Labor) at 395.00 k
Leading Index, Change P/P for May 2021 (The Conference Board) at 1.30 %, in line with consensus estimate
Philadelphia Fed, Future capital expenditures for Jun 2021 (FED, Philadelphia) at 40.40
Philadelphia Fed, Future general business activity for Jun 2021 (FED, Philadelphia) at 69.20
Philadelphia Fed, General business activity for Jun 2021 (FED, Philadelphia) at 30.70 , below consensus estimate of 31.00
Philadelphia Fed, New orders for Jun 2021 (FED, Philadelphia) at 22.20
Philadelphia Fed, Number of employees for Jun 2021 (FED, Philadelphia) at 30.70
Philadelphia Fed, Prices paid for Jun 2021 (FED, Philadelphia) at 80.70

3-month USD Libor 5 years forward down 3.0 bp
US Treasury 1-year zero-coupon rate 5 years forward down 11.8 bp, now at 2.1213%
1-Year Treasury rates are now expected to increase by 202.7 bp over the next 5 years
Looking at the USD OIS 3-month forward curve indicates that rate hikes could start as early as Q3 2022, with 75bp (3 hikes) expected through 2023

TIPS 1Y breakeven inflation at 3.19% (up 6.0bp); 2Y at 2.71% (up 6.4bp); 5Y at 2.45% (up 1.7bp); 10Y at 2.28% (down -2.5bp); 30Y at 2.29% (down -3.1bp)
6-month spot US CPI swap up 0.1 bp to 3.902%, with a steepening of the forward curve

USD swap rate implied volatility (USD 1 Month by 1 Year ATM Swaption) down -0.2% at 12.6%
3-Month LIBOR-OIS spread up 2.0 bp at 6.5 bp (12-months range: 4.5-26.2 bp)

Germany 5Y: -0.595% (up 2.2 bp); the German 1Y-10Y curve is 5.2 bp steeper at 45.9bp (YTD change: +31.5 bp)
Japan 5Y: -0.096% (up 1.4 bp); the Japanese 1Y-10Y curve is 1.1 bp steeper at 18.8bp (YTD change: +3.4 bp)
China 5Y: 3.001% (up 0.9 bp); the Chinese 1Y-10Y curve is 0.7 bp steeper at 67.8bp (YTD change: +21.4 bp)
Switzerland 5Y: -0.535% (up 0.2 bp); the Swiss 1Y-10Y curve is 1.2 bp steeper at 58.8bp (YTD change: +32.4 bp)