Rates

Real Treasury Yields Make New All-Time Lows, As Long-Term Rates Edge Down And Breakevens Rise

It's important to note that the dot plot has been tossed aside: fixed income markets now price in fewer than 2 rate hikes by the end of 2023, down from almost 3 hikes after the June FOMC

Published ET

Expected Hikes Derived From 3-Month USD OIS Forward Curve | Sources: ϕpost, Refinitiv data

Expected Hikes Derived From 3-Month USD OIS Forward Curve | Sources: ϕpost, Refinitiv data

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QUICK US SUMMARY

  • 3-Month USD LIBOR -0.2bp today, now at 0.1214%
  • The treasury yield curve flattened, with the 1s10s spread tightening -0.3 bp, now at 110.6 bp (YTD change: +30.1bp)
  • 1Y: 0.0680% (down 0.3 bp)
  • 2Y: 0.1722% (down 0.2 bp)
  • 5Y: 0.6473% (down 0.8 bp)
  • 7Y: 0.9444% (down 0.9 bp)
  • 10Y: 1.1738% (down 0.5 bp)
  • 30Y: 1.8446% (down 0.4 bp)
  • US treasury curve spreads: 2s5s at 47.5bp (down -0.8bp), 5s10s at 52.7bp (up 0.3bp today), 10s30s at 67.1bp (up 0.1bp today)
  • Treasuries butterfly spreads: 2s5s10s at 4.8bp (up 0.9bp today), 5s10s30s at 14.2bp (down -0.5bp)
  • US 5-Year TIPS Real Yield: -1.9 bp at -1.9720%; 10-Year TIPS Real Yield: -1.5 bp at -1.1930%; 30-Year TIPS Real Yield: -0.9 bp at -0.3750%

US MACRO RELEASES

  • Chain Store Sales, Johnson Redbook Index, yoy% index, Change Y/Y for W 31 Jul (Redbook Research) at 17.20 %
  • Manufacturers New Orders, Durable goods excluding defense, Change P/P for Jun 2021 (U.S. Census Bureau) at 1.10 %
  • Manufacturers New Orders, Durable goods excluding transportation, Change P/P for Jun 2021 (U.S. Census Bureau) at 0.50 %
  • Manufacturers New Orders, Durable goods total, Change P/P for Jun 2021 (U.S. Census Bureau) at 0.90 %
  • Manufacturers New Orders, Nondefense capital goods excluding aircraft, Change P/P for Jun 2021 (U.S. Census Bureau) at 0.70 %
  • Manufacturers New Orders, Total manufacturing excluding transportation, Change P/P for Jun 2021 (U.S. Census Bureau) at 1.40 %
  • Manufacturers New Orders, Total manufacturing, Change P/P for Jun 2021 (U.S. Census Bureau) at 1.50 %, above consensus estimate of 1.00 %
US Treasury Rates Intraday | Sources: ϕpost, Refinitiv dataUS Treasury Curve Spreads Intraday | Sources: ϕpost, Refinitiv data

US FORWARD RATES

  • US Treasury 1-year zero-coupon rate 5 years forward down 0.6 bp, now at 1.5768%
  • 1-Year Treasury rates are now expected to increase by 150.7 bp over the next 5 years
  • 3-month Eurodollar futures expected hike of 12.2 bp by the end of 2022 (meaning the market prices 48.8% chance of a 25bp hike by end of 2022)
  • The 3-month USD OIS forward curve prices in 10.8 bp of rate hikes over the next 18 months (equivalent to 0.43 rate hike) and 59.6 bp over the next 3 years (equivalent to 2.38 rate hikes)
US Fed Funds Futures Implied Yields | Sources: ϕpost, Refinitiv dataExpected Changes In 1Y Treasury Rate Forward | Sources: ϕpost, Refinitiv data

US INFLATION & REAL RATES

  • TIPS 1Y breakeven inflation at 3.26% (up 2.9bp); 2Y at 2.90% (down -2.4bp); 5Y at 2.69% (up 0.7bp); 10Y at 2.37% (up 1.0bp); 30Y at 2.24% (up 0.4bp)
  • 6-month spot US CPI swap up 1.9 bp to 4.212%, with a flattening of the forward curve
  • US Real Rates: 5Y at -1.9720%, -1.9 bp today; 10Y at -1.1930%, -1.5 bp today; 30Y at -0.3750%, -0.9 bp today
6-Month CPI Swap Forward Curve | Sources: ϕpost, Refinitiv data6-month CPI Swap 5 Years Forward | Sources: ϕpost, Refinitiv data

RATES VOLATILITY & LIQUIDITY

  • USD swap rate implied volatility (USD 1 Month by 1 Year ATM Swaption) up 0.3% at 15.9%
  • 3-Month LIBOR-OIS spread down -0.2 bp at 5.7 bp (12-months range: 3.7-22.0 bp)
US STIR Volatility | Sources: ϕpost, Refinitiv data3-Month USD LIBOR-OIS Spread | Sources: ϕpost, Refinitiv data

KEY INTERNATIONAL RATES

  • Germany 5Y: -0.748% (up 0.6 bp); the German 1Y-10Y curve is 0.5 bp flatter at 16.0bp (YTD change: +1.1 bp)
  • Japan 5Y: -0.129% (down -0.5 bp); the Japanese 1Y-10Y curve is 0.8 bp flatter at 13.4bp (YTD change: -0.6 bp)
  • China 5Y: 2.667% (up 2.4 bp); the Chinese 1Y-10Y curve is 1.6 bp steeper at 71.5bp (YTD change: +25.1 bp)
  • Switzerland 5Y: -0.705% (down -1.2 bp); the Swiss 1Y-10Y curve is 0.9 bp flatter at 33.0bp (YTD change: +6.6 bp)
DE JP CN CH 5Y Rates Differentials | Sources: ϕpost, Refinitiv dataGlobal Rate Hikes Expectations | Sources: ϕpost, Refinitiv data