Rates

US Rates Fall To Kick Off A Very Busy Week For Macro Events

With Chinese markets closed for a couple days, the Evergrande story looks like a head fake ahead of FOMC risk that is skewed towards higher rates: currently markets price in fewer than 4 rate hikes over the next 3 years, which might look light when the Fed releases its updated dot plot

Published ET

1Y Treasury Rate 5 Years Forward Has Been Trading In A Tight Range Since July | Sources: ϕpost, Refinitiv data

1Y Treasury Rate 5 Years Forward Has Been Trading In A Tight Range Since July | Sources: ϕpost, Refinitiv data

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QUICK US SUMMARY

  • 3-Month USD LIBOR +0.2bp today, now at 0.1254%
  • The treasury yield curve flattened, with the 1s10s spread tightening -5.1 bp, now at 124.1 bp (YTD change: +43.7bp)
  • 1Y: 0.0710% (unchanged)
  • 2Y: 0.2158% (down 1.0 bp)
  • 5Y: 0.8260% (down 3.6 bp)
  • 7Y: 1.1156% (down 4.7 bp)
  • 10Y: 1.3124% (down 5.1 bp)
  • 30Y: 1.8484% (down 5.5 bp)
  • US treasury curve spreads: 2s5s at 61.0bp (up 60.7bp today), 5s10s at 48.7bp (up 48.5bp today), 10s30s at 53.6bp (up 53.5bp today)
  • Treasuries butterfly spreads: 2s5s10s at -12.8bp (up 1.0bp today), 5s10s30s at 4.8bp (up 1.6bp)
  • US 5-Year TIPS Real Yield: +1.3 bp at -1.7090%; 10-Year TIPS Real Yield: -0.9 bp at -0.9900%; 30-Year TIPS Real Yield: -2.3 bp at -0.3420%

US MACRO RELEASES

  • NAHB/Wells Fargo Housing Market Index for Sep 2021 (NAHB, United States) at 76.00 (vs 75.00 prior), above consensus estimate of 74.00
US Treasury Yields 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 7.6 bp, now at 1.7514%, meaning that 1-Year Treasury rates are now expected to increase by 167.2 bp over the next 5 years
  • 3-month Eurodollar futures expected hike of 14.2 bp by the end of 2022 (meaning the market prices 56.8% chance of a 25bp hike by end of 2022)
  • The 3-month USD OIS forward curve prices in 91.3 bp over the next 3 years (equivalent to 3.65 rate hikes)
Implied Hikes From 3m USD OIS Forward Curve | Sources: ϕpost, Refinitiv data | Sources: ϕpost, Refinitiv dataImplied Timing Of Hikes Derived From 3m USD OIS Curve | Sources: ϕpost, Refinitiv data

US INFLATION & REAL RATES

  • TIPS 1Y breakeven inflation at 2.97% (down -5.9bp); 2Y at 2.73% (down -6.0bp); 5Y at 2.59% (down -5.2bp); 10Y at 2.28% (down -4.1bp); 30Y at 2.20% (down -3.1bp)
  • 6-month spot US CPI swap down -4.3 bp to 3.194%, with a flattening of the forward curve
  • US Real Rates: 5Y at -1.7090%, +1.3 bp today; 10Y at -0.9900%, -0.9 bp today; 30Y at -0.3420%, -2.3 bp today
US TIPS Real Yields | Sources: ϕpost, Refinitiv dataUS 6-Month CPI Swap Spot & 5 Years Forward | Sources: ϕpost, Refinitiv data

RATES VOLATILITY & LIQUIDITY

  • USD swap rate implied volatility (USD 1 Month by 1 Year ATM Swaption) up 0.8% at 14.5%
  • 3-Month LIBOR-OIS spread up 0.2 bp at 5.5 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: -0.638% (down -2.5 bp); the German 1Y-10Y curve is 3.5 bp flatter at 34.3bp (YTD change: +19.9 bp)
  • Japan 5Y: -0.085% at 18.0bp (YTD change: -14.6 bp)
  • Switzerland 5Y: -0.563% (up 0.7 bp); the Swiss 1Y-10Y curve is 2.0 bp flatter at 48.4bp (YTD change: +22.0 bp)
Changes In Global Inflation Expectations | Sources: ϕpost, Refinitiv dataChanges In Global Rate Hikes Expectations | Sources: ϕpost, Refinitiv data