Rates

Rates Fall Across The US Treasury Curve, Belly Hit Hardest, 1s5s10s Butterfly Spread Up 6bp Today

In macro news, continuing claims and productivity prints today showed that low-productivity service workers are going back to work, which weighed on productivity growth this quarter, at lowest level since 1981

Published ET

US Treasury Curve Spreads | Sources: ϕpost, Refinitiv data

US Treasury Curve Spreads | Sources: ϕpost, Refinitiv data

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QUICK US SUMMARY

  • 3-Month USD LIBOR +0.46bp today, now at 0.1398%; 3-Month OIS -0.1bp at 0.0770%
  • The treasury yield curve flattened, with the 1s10s spread tightening -5.8 bp, now at 136.0 bp (YTD change: +55.5bp)
  • 1Y: 0.1700% (down 1.5 bp)
  • 2Y: 0.4264% (down 4.9 bp)
  • 5Y: 1.1137% (down 7.6 bp)
  • 7Y: 1.3844% (down 7.5 bp)
  • 10Y: 1.5297% (down 7.4 bp)
  • 30Y: 1.9652% (down 5.9 bp)
  • US treasury curve spreads: 2s5s at 68.8bp (down -2.5bp), 5s10s at 41.6bp (up 0.2bp today), 10s30s at 43.6bp (up 1.4bp today)
  • Treasuries butterfly spreads: 1s5s10s at -56.0bp (up 6.3bp today), 5s10s30s at 1.4bp (up 1.8bp)
  • US 5-Year TIPS Real Yield: -7.3 bp at -1.7780%; 10-Year TIPS Real Yield: -8.3 bp at -1.0380%; 30-Year TIPS Real Yield: -7.4 bp at -0.3730%

US MACRO RELEASES

  • Announced job layoffs - Tally (Challenger, Gray & Christmas), Volume for Oct 2021 (Challenger) at 22.82 k (vs 17.90 k prior)
  • Jobless Claims, National, Continued for W 23 Oct (U.S. Dept. of Labor) at 2.11 Mln (vs 2.24 Mln prior), below consensus estimate of 2.12 Mln
  • Labor Cost, Total-prelim for Q3 2021 (BLS, U.S Dep. Of Lab) at 8.30 % (vs 1.30 % prior), above consensus estimate of 7.00 %
  • Labor Productivity, Total-prelim for Q3 2021 (BLS, U.S Dep. Of Lab) at -5.00 % (vs 2.10 % prior), below consensus estimate of -3.00 %
  • Trade Balance, Total, Goods and services for Sep 2021 (U.S. Census Bureau) at -80.90 Bln USD (vs -73.30 Bln USD prior), below consensus estimate of -80.50 Bln USD
  • Jobless Claims, National, Initial for W 30 Oct (U.S. Dept. of Labor) at 269.00 k (vs 281.00 k prior), below consensus estimate of 275.00 k
  • Jobless Claims, National, Initial, four week moving average for W 30 Oct (U.S. Dept. of Labor) at 284.75 k (vs 299.25 k prior)
US Treasury Yields Intraday | Sources: ϕpost, Refinitiv dataUS Treasury Curve Spreads Intraday | Sources: ϕpost, Refinitiv data

US FORWARD RATES

  • 3-month Eurodollar future (EDU2) expected hike of 43.1 bp by the end of 2022 (equivalent to 1.7 hikes by end of 2022), down -4.5 bp today
  • The 3-month USD OIS forward curve prices in 122.8 bp over the next 3 years (equivalent to 4.91 rate hikes)
  • The 3-month Eurodollar zero curve prices in 143.4 bp over the next 3 years (equivalent to 5.73 rate hikes), meaning the 3Y forward 3-month USD FRA-OIS spread is about 20bp
  • 1-year US Treasury rate 5 years forward down 8.1 bp, now at 2.0048%, meaning that the 1-year Treasury rate is now expected to increase by 184.7 bp over the next 5 years (equivalent to 7.4 rate hikes)
Eurodollar Futures Implied Yields | Sources: ϕpost, Refinitiv dataChanges In Fed Hikes Expectations This Year | Sources: ϕpost, Refinitiv data

US INFLATION & REAL RATES

  • TIPS 1Y breakeven inflation at 4.06% (up 12.7bp); 2Y at 3.35% (up 2.4bp); 5Y at 2.96% (up 0.0bp); 10Y at 2.54% (up 0.8bp); 30Y at 2.35% (up 1.4bp)
  • 6-month spot US CPI swap down -0.7 bp to 3.585%, with a flattening of the forward curve
  • US Real Rates: 5Y at -1.7780%, -7.3 bp today; 10Y at -1.0380%, -8.3 bp today; 30Y at -0.3730%, -7.4 bp today
The shifting face of transitory US inflation | Sources: ϕpost, Refinitiv dataUS TIPS Real Yields | Sources: ϕpost, Refinitiv data

RATES VOLATILITY & LIQUIDITY

  • USD swap rate implied volatility (USD 1 Month by 1 Year ATM Swaption) down -5.7% at 38.7%
  • 3-Month LIBOR-OIS spread down -0.4 bp at 6.3 bp (12-months range: 2.6-17.4 bp)
US Rates Volatility | Sources: ϕpost, Refinitiv data3-Month Spot USD LIBOR-OIS Spread | Sources: ϕpost, Refinitiv data

KEY INTERNATIONAL RATES

  • Germany 5Y: -0.559% (down -8.7 bp); the German 1Y-10Y curve is 10.3 bp flatter at 42.9bp (YTD change: +27.2 bp)
  • Japan 5Y: -0.083% (down -0.1 bp); the Japanese 1Y-10Y curve is 0.9 bp flatter at 17.7bp (YTD change: +3.3 bp)
  • China 5Y: 2.768% (down -1.5 bp); the Chinese 1Y-10Y curve is 1.2 bp steeper at 72.6bp (YTD change: +26.2 bp)
  • Switzerland 5Y: -0.437% (down -7.6 bp); the Swiss 1Y-10Y curve is 3.2 bp flatter at 59.2bp (YTD change: +32.8 bp)
Changes In Global Inflation Expectations | Sources: ϕpost, Refinitiv dataChanges In Forward Rates Expectations | Sources: ϕpost, Refinitiv data