Rates

US Rates Rise Slightly, Treasury Curve Spreads Little Changed

The implied probability of the first Fed hike taking place in 2022 is now at 79%, up from 60% last week, with just under 3 hikes expected through 2023

Published ET

One-year forward 1-year inflation rates in major countries | Sources: ϕpost, Refinitiv data

One-year forward 1-year inflation rates in major countries | Sources: ϕpost, Refinitiv data


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QUICK US SUMMARY

  • Yield curve steepening, with the 1s10s Treasury spread widening 0.7 bp on the day, now at 130.0 bp (YTD change: +49.5)
  • 1Y: 0.0680% (unchanged)
  • 2Y: 0.2267% (up 1.2 bp)
  • 5Y: 0.7946% (up 0.8 bp)
  • 7Y: 1.1156% (up 0.1 bp)
  • 10Y: 1.3678% (up 0.7 bp)
  • 30Y: 1.9995% (up 1.0 bp)
  • US treasury curve spreads: 2s5s at 56.8bp (down -0.4bp today), 5s10s at 57.3bp (down -0.1bp today), 10s30s at 63.2bp (up 0.2bp today)
  • Treasuries butterfly spreads: 2s5s10s at 0.2bp (up 0.3bp today), 5s10s30s at 5.8bp (up 1.0bp today)

US MACRO HEADLINES

  • US$ 67.5 bn 3-year treasury note auction results were average: high yield at 0.426% (vs 0.325% prior),direct bids: 18.3%, indirect bids: 53.2% (vs 54.2% prior), bid-to-cover: 2.41 (vs 2.47 prior)
  • US$ 44.3 bn 10-year treasury note auction results were a little better: yields at 1.371%, with bid-to-cover at 2.39 (vs 2.40 prior), allotted at high 52.61%, indirect participation 63.5% (vs 60.63% average), direct Participation 17.5% (vs 16.37% average)
US Rates Intraday | Sources: ϕpost, Refinitiv dataUS Curve Spreads Intraday | Sources: ϕpost, Refinitiv data

US FORWARD RATES

  • 3-month USD Libor 5 years forward down 0.3 bp
  • US Treasury 1-year zero-coupon rate 5 years forward down 0.3 bp, now at 1.8469%
  • 1-Year Treasury rates are now expected to increase by 175.8 bp over the next 5 years
  • The market currently expects the 3-month USD OIS rate to rise by 19.8 bp over the next 18 months (equivalent to 0.79 rate hike) and 89.4 bp over the next 3 years (equivalent to 3.58 rate hikes)
US Fed Funds Futures Implied Yields | Sources: ϕpost, Refinitiv dataRate Hikes Implied From 3m USD OIS Forward Curve | Sources: ϕpost, Refinitiv data

US INFLATION

  • TIPS 1Y breakeven inflation at 2.95% (up 2.5bp); 2Y at 2.67% (up 4.7bp); 5Y at 2.51% (up 3.8bp); 10Y at 2.32% (up 4.0bp); 30Y at 2.27% (up 3.5bp)
  • 6-month spot US CPI swap up 3.4 bp to 4.181%, with a steepening of the forward curve
US TIPS Breakevens | Sources: ϕpost, Refinitiv data6-Month CPI Swap Forward Curve | Sources: ϕpost, Refinitiv data

RATES VOLATILITY & LIQUIDITY

  • USD swap rate implied volatility (USD 1 Month by 1 Year ATM Swaption) up 0.1% at 14.6%
  • 3-Month LIBOR-OIS spread up 0.4 bp at 5.1 bp (12-months range: 3.7-23.6 bp)
US STIR Implied Volatilities | Sources: ϕpost, Refinitiv data 3-month USD LIBOR-OIS Spread | Sources: ϕpost, Refinitiv data

KEY INTERNATIONAL RATES

  • Germany 5Y: -0.600% (down -0.4 bp); the German 1Y-10Y curve is 1.9 bp flatter at 35.3bp (YTD change: +20.1 bp)
  • Japan 5Y: -0.116% (up 0.1 bp); the Japanese 1Y-10Y curve is 0.1 bp flatter at 14.3bp (YTD change: +0.2 bp)
  • China 5Y: 2.792% (down -7.4 bp); the Chinese 1Y-10Y curve is 4.0 bp flatter at 85.3bp (YTD change: +38.9 bp)
  • Switzerland 5Y: -0.616% (up 2.6 bp); the Swiss 1Y-10Y curve is 1.0 bp flatter at 49.1bp (YTD change: +22.7 bp)
5-Year Sovereign Rates Differentials | Sources: ϕpost, Refinitiv dataImplied Hikes Over Next 5 Years | Sources: ϕpost, Refinitiv data