US Rates Drop Slightly, Curve Flattens After Big Gains Since The FOMC

Interestingly, the rise in rates has come both from higher real rates and higher inflation expectations, which have yet to moderate with the climb in yields

Published ET

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  • 3-Month USD LIBOR -0.1bp today, now at 0.1309%
  • The treasury yield curve flattened, with the 1s10s spread tightening -2.0 bp, now at 144.3 bp (YTD change: +63.8bp)
  • 1Y: 0.0810% (down 0.3 bp)
  • 2Y: 0.2931% (down 1.2 bp)
  • 5Y: 0.9954% (down 2.9 bp)
  • 7Y: 1.3274% (down 1.3 bp)
  • 10Y: 1.5236% (down 2.3 bp)
  • 30Y: 2.0689% (down 2.7 bp)
  • US treasury curve spreads: 2s5s at 70.3bp (down -1.7bp), 5s10s at 52.8bp (up 0.6bp today), 10s30s at 54.5bp (down -0.5bp)
  • Treasuries butterfly spreads: 2s5s10s at -17.8bp (up 2.4bp today), 5s10s30s at 1.7bp (down -0.8bp)
  • US 5-Year TIPS Real Yield: -0.7 bp at -1.6150%; 10-Year TIPS Real Yield: -0.3 bp at -0.8490%; 30-Year TIPS Real Yield: -1.0 bp at -0.1930%


  • Mortgage applications, market composite index, refinancing for W 24 Sep (MBA, USA) at 3,359.50 (vs 3,391.10 prior)
  • Mortgage Lending Rates, FRM 30-Year Contract Rate (MBA Sourced) for W 24 Sep (MBA, USA) at 3.10 % (vs 3.03 % prior)
  • Mortgage applications, market composite index, purchase for W 24 Sep (MBA, USA) at 280.40 (vs 283.90 prior)
  • MBA Mortgage Applications Survey composite index, weekly percentage change, Change P/P for W 24 Sep (MBA, USA) at -1.10 % (vs 4.90 % prior)
  • Mortgage applications, market composite index for W 24 Sep (MBA, USA) at 734.90 (vs 742.70 prior)
  • Pending Home Sales, United States, Change P/P for Aug 2021 (NAR, United States) at 8.10 % (vs -1.80 % prior), above consensus estimate of 1.40 %
  • Pending Home Sales, United States for Aug 2021 (NAR, United States) at 119.50 (vs 110.70 prior)
US rates intraday | Sources: ϕpost, Refinitiv dataUS Treasury Curve Spreads Intraday | Sources: ϕpost, Refinitiv data


  • 3-month Eurodollar future (EDU2) expected hike of 19.2 bp by the end of 2022 (meaning the market prices 76.8% chance of a 25bp hike by end of 2022)
  • The 3-month USD OIS forward curve prices in 104.1 bp over the next 3 years (equivalent to 4.16 rate hikes)
  • The 3-month Eurodollar zero curve prices in 129.5 bp over the next 3 years (equivalent to 5.18 rate hikes)
  • 1-year US Treasury rate 5 years forward down 1.8 bp, now at 2.0849%, meaning that the 1-year Treasury rate is now expected to increase by 198.7 bp over the next 5 years (equivalent to 7.9 rate hikes)
3-Month Eurodollar Implied Yields | Sources: ϕpost, Refinitiv dataImplied Hikes From 1Y Treasury Forward Rates | Sources: ϕpost, Refinitiv data


  • TIPS 1Y breakeven inflation at 3.02% (up 1.7bp); 2Y at 2.79% (up 0.8bp); 5Y at 2.65% (down -2.3bp); 10Y at 2.35% (down -2.0bp); 30Y at 2.27% (down -1.7bp)
  • 6-month spot US CPI swap up 21.7 bp to 3.399%, with a steepening of the forward curve
  • US Real Rates: 5Y at -1.6150%, -0.7 bp today; 10Y at -0.8490%, -0.3 bp today; 30Y at -0.1930%, -1.0 bp today
US TIPS Real Yields | Sources: ϕpost, Refinitiv dataUS TIPS Breakeven Inflation Curve | Sources: ϕpost, Refinitiv data


  • USD swap rate implied volatility (USD 1 Month by 1 Year ATM Swaption) down -0.3% at 16.7%
  • 3-Month LIBOR-OIS spread down -1.7 bp at 6.1 bp (12-months range: 3.7-22.0 bp)
US Rates Volatility | Sources: ϕpost, Refinitiv data3m USD LIBOR-OIS Spread | Sources: ϕpost, Refinitiv data


  • Germany 5Y: -0.556% (down -1.2 bp); the German 1Y-10Y curve is 3.8 bp steeper at 46.7bp (YTD change: +30.7 bp)
  • Japan 5Y: -0.072% (down -0.1 bp); the Japanese 1Y-10Y curve is 0.8 bp flatter at 18.3bp (YTD change: +4.3 bp)
  • China 5Y: 2.708% (unchanged); the Chinese 1Y-10Y curve is 0.4 bp steeper at 54.3bp (YTD change: +7.9 bp)
  • Switzerland 5Y: -0.522% (down -3.3 bp); the Swiss 1Y-10Y curve is 2.9 bp flatter at 50.1bp (YTD change: +25.7 bp)
Changes in Global Rate Hikes Expectations | Sources: ϕpost, Refinitiv dataChanges in Global Inflation Expectations | Sources: ϕpost, Refinitiv data