Rates

Modest Rise In Yields At The Front End Of The US Treasury Curve, With Flattening Further Down; 5s10s Spread Closed The Week At Just 0.6bp

Minneapolis Fed President Kashkari thinks the neutral Fed Funds rate is likely 2% (below the Fed's published number), which matches the estimates of sell-siders like Morgan Stanley's Ellen Zentner; if that is correct, forward markets now expect neutral to be reached by the end of the year

Published ET

3-Month USD OIS Forward Rates | Sources: ϕpost, Refinitiv data

3-Month USD OIS Forward Rates | Sources: ϕpost, Refinitiv data


Twitter iconFacebook iconLinkedIn iconemail iconWhatsApp icon

QUICK US SUMMARY

  • 3-Month USD LIBOR +0.6bp today, now at 0.9340%; 3-Month OIS +2.1bp at 0.5555%
  • The treasury yield curve flattened, with the 1s10s spread tightening -1.1 bp, now at 94.6 bp (YTD change: -18.6bp)
  • 1Y: 1.2052% (down 0.3 bp)
  • 2Y: 1.9413% (up 2.6 bp)
  • 5Y: 2.1453% (up 0.4 bp)
  • 7Y: 2.1784% (down 0.8 bp)
  • 10Y: 2.1512% (down 1.4 bp)
  • 30Y: 2.4199% (down 4.0 bp)
  • US treasury curve spreads: 3m2Y at 153.4bp (up 1.4bp today), 2s5s at 20.4bp (down -2.1bp), 5s10s at 0.6bp (down -1.8bp), 10s30s at 26.9bp (down -2.6bp)
  • Treasuries butterfly spreads: 1s5s10s at -95.7bp (down -3.2bp), 5s10s30s at 25.8bp (down -0.6bp)
  • TIPS 1Y breakeven inflation at 5.88% (down -3.6bp); 2Y at 4.69% (down -4.3bp); 5Y at 3.45% (down -5.1bp); 10Y at 2.90% (down -3.7bp); 30Y at 2.52% (down -5.1bp)
  • US 5-Year TIPS Real Yield: +6.3 bp at -1.3960%; 10-Year TIPS Real Yield: +2.2 bp at -0.7410%; 30-Year TIPS Real Yield: +1.0 bp at -0.0930%

US MACRO RELEASES

  • Existing-Home Sales, Single-Family and Condos, total for Feb 2022 (NAR, United States) at 6.02 Mln (vs 6.50 Mln prior), below consensus estimate of 6.10 Mln
  • Existing-Home Sales, Single-Family and Condos, total, Change P/P for Feb 2022 (NAR, United States) at -7.20 % (vs 6.70 % prior)
  • Leading Index, Change P/P for Feb 2022 (The Conference Board) at 0.30 % (vs -0.30 % prior), below consensus estimate of 0.30 %
US Treasury Yields Intraday | Sources: ϕpost, Refinitiv dataUS Treasury Curve Spreads Intraday | Sources: ϕpost, Refinitiv data

US FORWARD RATES

  • Fed Funds futures now price in 36.7bp of Fed hikes by the end of May 2022, 71.8bp (2.87 x 25bp hikes) by the end of June 2022, and price in 7.27 hikes by the end of February 2023
  • 3-month Eurodollar futures (EDZ) spreads price in 37 bp of hikes in 2023 (equivalent to 1.5 x 25 bp hikes), down -4.0 bp today, and -29.5 bp of hikes in 2024 (equivalent to -1.2 x 25 bp hikes)
Fed Hikes 2022 | Sources: ϕpost, Refinitiv dataFed Hikes 2023-2026 | Sources: ϕpost, Refinitiv data

US INFLATION & REAL RATES

  • TIPS 1Y breakeven inflation at 5.88% (down -3.6bp); 2Y at 4.69% (down -4.3bp); 5Y at 3.45% (down -5.1bp); 10Y at 2.90% (down -3.7bp); 30Y at 2.52% (down -5.1bp)
  • 6-month spot US CPI swap up 9.7 bp to 6.054%, with a steepening of the forward curve
  • US Real Rates: 5Y at -1.3960%, +6.3 bp today; 10Y at -0.7410%, +2.2 bp today; 30Y at -0.0930%, +1.0 bp today
US Forward-Starting CPI Swaps | Sources: ϕpost, Refinitiv data US TIPS Real Yields | Sources: ϕpost, Refinitiv data

RATES VOLATILITY & LIQUIDITY

  • USD swap rate implied volatility (USD 1 Month by 1 Year ATM Swaption) down -0.8 vols at 103.1 normals
  • 3-Month LIBOR-OIS spread down -1.5 bp at 37.9 bp (12-months range: -5.5-39.3 bp)
US Rates Volatility | Sources: ϕpost, Refinitiv data3M USD LIBOR-OIS Spot Spread | Sources: ϕpost, Refinitiv data

KEY INTERNATIONAL RATES

  • Germany 5Y: 0.087% (down -3.4 bp); the German 1Y-10Y curve is 3.6 bp flatter at 97.3bp (YTD change: +54.1 bp)
  • Japan 5Y: 0.042% (up 0.1 bp); the Japanese 1Y-10Y curve is unchanged at 27.6bp (YTD change: +10.2 bp)
  • China 5Y: 2.536% (up 0.4 bp); the Chinese 1Y-10Y curve is 1.1 bp flatter at 63.3bp (YTD change: +12.3 bp)
  • Switzerland 5Y: 0.034% (down -2.9 bp); the Swiss 1Y-10Y curve is 2.6 bp flatter at 99.2bp (YTD change: +44.7 bp)
Changes In Forward Hikes Expectations | Sources: ϕpost, Refinitiv dataChanges In Global Inflation Expectations | Sources: ϕpost, Refinitiv data