Rates

US Rates Edge Down On Light Macro Schedule, Real Rates Up With Lower Breakevens

The market is awaiting the latest CPI print tomorrow (+0.4% m/m expected vs 0.5% prior), probably the most important data point ahead of the FOMC next week, as the Fed is looking for some confirmation of the transitory nature of inflation

Published ET

US 6-Month CPI Swap Forward Curve | Sources: ϕpost, Refinitiv data

US 6-Month CPI Swap Forward Curve | Sources: ϕpost, Refinitiv data

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QUICK US SUMMARY

  • 3-Month USD LIBOR unchanged at 0.1160%
  • The treasury yield curve flattened, with the 1s10s spread tightening -1.7 bp, now at 125.5 bp (YTD change: +45.0bp)
  • 1Y: 0.0710% (unchanged)
  • 2Y: 0.2129% (down 0.2 bp)
  • 5Y: 0.8063% (down 1.0 bp)
  • 7Y: 1.1063% (down 1.6 bp)
  • 10Y: 1.3259% (down 1.7 bp)
  • 30Y: 1.9058% (down 2.9 bp)
  • US treasury curve spreads: 2s5s at 59.4bp (down -0.8bp), 5s10s at 52.0bp (down -0.7bp), 10s30s at 58.0bp (down -1.2bp)
  • Treasuries butterfly spreads: 2s5s10s at -7.8bp (up 0.1bp today), 5s10s30s at 5.3bp (down -0.9bp)
  • US 5-Year TIPS Real Yield: +0.8 bp at -1.8030%; 10-Year TIPS Real Yield: +0.6 bp at -1.0430%; 30-Year TIPS Real Yield: -0.6 bp at -0.3410%

US MACRO RELEASES TODAY

  • Federal Budget, Current Prices for Aug 2021 (Fiscal Service, USA) at -171.00 Bln USD (vs -302.00 Bln USD prior), slightly better than the consensus estimate of -173.00 Bln USD

RELEASES COMING LATER THIS WEEK

Weekly US data releases | Source: Goldman Sachs

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 2.6 bp, now at 1.7610%
  • 1-Year Treasury rates are now expected to increase by 168.1 bp over the next 5 years
  • 3-month Eurodollar futures expected hike of 15.5 bp by the end of 2022 (meaning the market prices 62.0% chance of a 25bp hike by end of 2022)
Eurodollar Futures Implied Yields | Sources: ϕpost, Refinitiv data1 Year Treasury Rate 5 Years Forward | Sources: ϕpost, Refinitiv data

US INFLATION & REAL RATES

  • TIPS 1Y breakeven inflation at 3.11% (up 0.5bp); 2Y at 2.84% (down -1.3bp); 5Y at 2.66% (down -2.2bp); 10Y at 2.35% (down -2.3bp); 30Y at 2.26% (down -2.3bp)
  • 6-month spot US CPI swap down -0.2 bp to 4.114%, with a steepening of the forward curve
  • US Real Rates: 5Y at -1.8030%, +0.8 bp today; 10Y at -1.0430%, +0.6 bp today; 30Y at -0.3410%, -0.6 bp today
US TIPS Real Yields | Sources: ϕpost, Refinitiv dataUS 6-Month CPI 5 Years Forward | Sources: ϕpost, Refinitiv data

RATES VOLATILITY & LIQUIDITY

  • USD swap rate implied volatility (USD 1 Month by 1 Year ATM Swaption) up 0.4% at 13.2%
  • 3-Month LIBOR-OIS spread up 1.5 bp at 6.5 bp (12-months range: 3.7-22.0 bp)
US Rates Volatility | Sources: ϕpost, Refinitiv data3-month USD LIBOR-OIS Spread | Sources: ϕpost, Refinitiv data

KEY INTERNATIONAL RATES

  • Germany 5Y: -0.637%; the German 1Y-10Y curve is 0.2 bp steeper at 34.0bp (YTD change: +18.6 bp)
  • Japan 5Y: -0.092%; the Japanese 1Y-10Y curve is 0.4 bp steeper at 15.4bp (YTD change: +1.3 bp)
  • China 5Y: 2.715% (up 0.7 bp); the Chinese 1Y-10Y curve is 0.4 bp steeper at 61.8bp (YTD change: +15.4 bp)
  • Switzerland 5Y: -0.574% (up 2.9 bp); the Swiss 1Y-10Y curve is 1.2 bp steeper at 43.7bp (YTD change: +18.3 bp)
Changes In Global Inflation Expectations | Sources: ϕpost, Refinitiv dataChanges In Global Rate Hikes Expectations | Sources: ϕpost, Refinitiv data