Rates
US Rates Rise Slightly, Mostly In The Belly Of The Curve
Looking at the USD OIS forward curve, the market is now pricing in almost 1 full rate hike by the end of 2022 and 3 rate hikes by the end of 2023
Published ET

Timing of rate hikes priced into the USD OIS forward curve over the next 5 years | Sources: ϕpost, Refinitiv data
QUICK US SUMMARY
- Yield curve steepening, with the 1s10s Treasury spread widening 1.6 bp on the day, now at 141.5 bp (YTD change: +61.0)
- 1Y: 0.0840% (down 0.3 bp)
- 2Y: 0.2700% (up 0.6 bp)
- 5Y: 0.9150% (up 3.5 bp)
- 7Y: 1.2535% (up 1.3 bp)
- 10Y: 1.4987% (up 1.3 bp)
- 30Y: 2.1062% (up 0.1 bp)
- US treasury curve spreads: 2s5s at 64.5bp (up 2.9bp today), 5s10s at 58.4bp (down -2.2bp today), 10s30s at 60.8bp (down -1.1bp today)
- Treasuries butterfly spreads: 2s5s10s at -6.5bp (down -5.1bp today), 5s10s30s at 2.3bp (up 0.9bp today)
- Strong 7-Year Treasury auction with a minor stop-trough of 0.3bp: high yield of 1.264% (vs 1.285% prior), non-dealer bidding of 81.3% with direct bids at 21.3% (vs 20.7% prior), indirects at 60.0% (vs 59.6% prior), bid-to-cover of 2.36 (vs 2.41 prior)
The fall in the 2s5s10s butterfly spread illustrates how strong rates have been in the belly of the curve over the past week
US MACRO RELEASES
- Corporate Profits, Profits after tax total, Change P/P for Q1 2021 (BEA, US Dept. Of Com) at 1.70%
- GDP, Total-final (Unrevised), Change P/P for Q1 2021 (BEA, US Dept. Of Com) at 6.40 %, in line with consensus estimate
- Implicit Price Deflator, GDP, Total-final, Change P/P for Q1 2021 (BEA, US Dept. Of Com) at 4.30 %, in line with consensus estimate
- Jobless Claims, National, Continued for W 12 Jun (U.S. Dept. of Labor) at 3.39 Mln, below consensus estimate of 3.47 Mln
- Jobless Claims, National, Initial for W 19 Jun (U.S. Dept. of Labor) at 411.00 k, above consensus estimate of 380.00 k
- Jobless Claims, National, Initial, four week moving average for W 19 Jun (U.S. Dept. of Labor) at 397.75 k
- Kansas Fed, Current composite index for Jun 2021 (FED, Kansas) at 27.00
- Kansas Fed, Current production index for Jun 2021 (FED, Kansas) at 30.00
- Manufacturers New Orders, Durable goods excluding defense, Change P/P for May 2021 (U.S. Census Bureau) at 1.70 %
- Manufacturers New Orders, Durable goods excluding transportation, Change P/P for May 2021 (U.S. Census Bureau) at 0.30 %, below consensus estimate of 0.80 %
- Manufacturers New Orders, Durable goods total, Change P/P for May 2021 (U.S. Census Bureau) at 2.30 %, below consensus estimate of 2.80 %
- Manufacturers New Orders, Nondefense capital goods excluding aircraft, Change P/P for May 2021 (U.S. Census Bureau) at -0.10 %, below consensus estimate of 0.60 %
- Personal Consumption Expenditure, Profits after tax total-final, Change P/P for Q1 2021 (BEA, US Dept. Of Com) at 11.40 %
- Personal Consumption Expenditure, Total-final, Change P/P for Q1 2021 (BEA, US Dept. Of Com) at 2.50 %, in line with consensus estimate
- Personal Consumption Expenditure, Total-final, Change P/P for Q1 2021 (BEA, US Dept. Of Com) at 3.70 %, in line with consensus estimate
- Retail Inventories Advance, Change P/P for May 2021 (U.S. Census Bureau) at 0.90 %
- Total-final, Change P/P for Q1 2021 (BEA, US Dept. Of Com) at 9.20 %, below consensus estimate of 9.50 %
- US Adv Goods Trade Balance, Current Prices for May 2021 (U.S. Census Bureau) at $US -88.11 bn
- Wholesale Inventories Advance, Change P/P for May 2021 (U.S. Census Bureau) at 1.10%
US FORWARD RATES
- 3-month USD Libor 5 years forward up 0.1 bp
- US Treasury 1-year zero-coupon rate 5 years forward up 1.2 bp, now at 2.0715%
- 1-Year Treasury rates are now expected to increase by 196.9 bp over the next 5 years
- The market currently expects the 3-month USD OIS rate to rise by 20.7 bp over the next 18 months (equivalent to 0.8 rate hike)and 107.3 bp over the next 3 years (equivalent to 4.3 rate hikes)
US INFLATION
- TIPS 1Y breakeven inflation at 3.18% (down -5.2bp); 2Y at 2.72% (down -4.1bp); 5Y at 2.46% (down -3.9bp); 10Y at 2.31% (down -3.2bp); 30Y at 2.27% (down -2.3bp)
- 6-month spot US CPI swap down -10.9 bp to 3.926%, with a flattening of the forward curve
RATES VOLATILITY & LIQUIDITY
- USD swap rate implied volatility (USD 1 Month by 1 Year ATM Swaption) unchanged at 13.6%
- 3-Month LIBOR-OIS spread down -1.6 bp at 6.3 bp (12-months range: 4.5-26.2 bp)
KEY INTERNATIONAL RATES
- Germany 5Y: -0.568% (up 0.2 bp); the German 1Y-10Y curve is 0.7 bp flatter at 45.0bp (YTD change: +29.9 bp)
- Japan 5Y: -0.098% (down 0.0 bp); the Japanese 1Y-10Y curve is 0.2 bp flatter at 16.7bp (YTD change: +2.9 bp)
- China 5Y: 2.933% (down -0.6 bp); the Chinese 1Y-10Y curve is 5.2 bp steeper at 69.8bp (YTD change: +23.4 bp)
- Switzerland 5Y: -0.537% (down -3.3 bp); the Swiss 1Y-10Y curve is 0.4 bp steeper at 60.3bp (YTD change: +31.4 bp)