US Rates Rise As Market Awaits Monthly CPI Print Tomorrow

The rise was most evident in the belly of the curve, as 3-year forward short rates are back to pricing fully (and more) the Fed's dot plot

Published ET

Fed Hikes Priced Into The 3-month USD OIS Forward Curve | Sources: ϕpost, Refinitiv data

Fed Hikes Priced Into The 3-month USD OIS Forward Curve | Sources: ϕpost, Refinitiv data

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  • 3-Month USD LIBOR -0.4bp today, now at 0.1228%
  • The treasury yield curve steepened, with the 1s10s spread widening 2.9 bp, now at 127.8 bp (YTD change: +47.4bp)
  • 1Y: 0.0760% (unchanged)
  • 2Y: 0.2384% (up 1.6 bp)
  • 5Y: 0.8292% (up 3.1 bp)
  • 7Y: 1.1309% (up 2.8 bp)
  • 10Y: 1.3541% (up 2.9 bp)
  • 30Y: 2.0015% (up 3.1 bp)
  • US treasury curve spreads: 2s5s at 59.1bp (up 1.5bp today), 5s10s at 52.5bp (down -0.2bp), 10s30s at 64.8bp (up 0.3bp today)
  • Treasuries butterfly spreads: 2s5s10s at -7.0bp (down -1.7bp), 5s10s30s at 12.1bp (up 0.5bp)
  • US 5-Year TIPS Real Yield: +0.3 bp at -1.7850%; 10-Year TIPS Real Yield: +0.2 bp at -1.0330%; 30-Year TIPS Real Yield: +0.3 bp at -0.2700%


  • Solid 3-year treasury auction (91282CCT6), with a slight stop-through helped by the recent cheapening of this point on the curve: high yield of 0.465% (vs 0.467% when issued and 0.426% prior), strong indirect bid at 55.41% ( vs 53.2% prior and 51.16% average over last 5 auctions) and 1-year-high direct bid at 18.43% (vs 18.3% prior), 2.54x bid-to-cover ratio (vs 2.41 prior and 2.46x average for the last 5 auctions)
  • As expected, the Senate passed a US$1 trillion infrastructure bill today that includes about $550 bn in new spending


  • Labor Cost, Total-prelim for Q2 2021 (BLS, U.S Dep. Of Lab) at 1.00 %, below consensus estimate of 1.10 %
  • Labor Productivity, Total-prelim for Q2 2021 (BLS, U.S Dep. Of Lab) at 2.30 %, below consensus estimate of 3.50 %
  • NFIB, Index of Small Business Optimism for Jul 2021 (NFIB, United States) at 99.70
US Treasury Rates Intraday | Sources: ϕpost, Refinitiv dataUS Treasury Curve Spreads Intraday | Sources: ϕpost, Refinitiv data


  • US Treasury 1-year zero-coupon rate 5 years forward up 2.7 bp, now at 1.7900%
  • 1-Year Treasury rates are now expected to increase by 170.4 bp over the next 5 years
  • 3-month Eurodollar futures expected hike of 20.0 bp by the end of 2022 (meaning the market prices 80.0% chance of a 25bp hike by end of 2022)
  • The 3-month USD OIS forward curve prices in 21.3 bp of rate hikes over the next 18 months (equivalent to 0.85 rate hike) and 87.7 bp over the next 3 years (equivalent to 3.51 rate hikes)
3-Month Eurodollar Futures Implied Yields | Sources: ϕpost, Refinitiv dataImplied Timing Of Rate Hikes | Sources: ϕpost, Refinitiv data


  • TIPS 1Y breakeven inflation at 3.08% (up 5.5bp); 2Y at 2.80% (up 6.4bp); 5Y at 2.68% (up 2.8bp); 10Y at 2.39% (up 2.7bp); 30Y at 2.29% (up 2.9bp)
  • 6-month spot US CPI swap up 2.4 bp to 4.02%, with a flattening of the forward curve

6-Month CPI Swap Forward Curve | Sources: phipost.com, Refinitiv data

  • US Real Rates: 5Y at -1.7850%, +0.3 bp today; 10Y at -1.0330%, +0.2 bp today; 30Y at -0.2700%, +0.3 bp today
US TIPS Breakeven Inflation Curve | Sources: ϕpost, Refinitiv dataUS TIPS Real Yields | Sources: ϕpost, Refinitiv data


  • USD swap rate implied volatility (USD 1 Month by 1 Year ATM Swaption) up 0.5% at 16.7%
  • 3-Month LIBOR-OIS spread down -2.1 bp at 4.1 bp (12-months range: 3.7-22.0 bp)
ICE BofAML MOVE Volatility Indices | Sources: ϕpost, Refinitiv data3-month USD LIBOR-OIS Spread | Sources: ϕpost, Refinitiv data


  • Germany 5Y: -0.723% (up 0.1 bp); the German 1Y-10Y curve is 0.8 bp steeper at 19.8bp (YTD change: +4.8 bp)
  • Japan 5Y: -0.117% (up 1.0 bp); the Japanese 1Y-10Y curve is 0.3 bp steeper at 15.9bp (YTD change: +1.4 bp)
  • China 5Y: 2.713% (down -0.6 bp); the Chinese 1Y-10Y curve is 1.1 bp flatter at 68.2bp (YTD change: +21.8 bp)
  • Switzerland 5Y: -0.690% (down -1.5 bp); the Swiss 1Y-10Y curve is 0.3 bp steeper at 40.7bp (YTD change: +10.3 bp)
5Y Rates Differentials | Sources: ϕpost, Refinitiv dataGlobal 5-Year Implied Hikes | Sources: ϕpost, Refinitiv data