Short Rates Desk
Fri, Sep 04, 2026

Notes for Fri, Sep 04, 2026

Morning brief

· generated 07:00 ET

Morning desk continuity update

Current morning update at 11:00 UTC for the slot scheduled at 11:00 UTC. Validated curve levels as of 2026-09-03 21:30 UTC: 2Y 4.34%, 5Y 4.522%, 10Y 4.772%, 30Y 5.252%. The full analytical synthesis was unavailable; this update contains only validated continuity inputs.

Generated by Short Rates Desk. Informational only. Not investment advice.

Close brief

· generated 03:09 ET

Hold the flattening lean into CPI

We keep a modest 2s10s flattening bias and add no new risk overnight, with CPI as the confirm and quarter-end funding as the secondary risk.

The call into CPI

Hold the modest 2s10s flattening bias and put on no new executable risk overnight. The 2s10s spread flattened -2.4bp from the same-session morning baseline to the 2026-09-04 close, a curve-flattener session classification.[1] The 2s10s spread was 40.8bp at the 2026-09-04 close.[2] The 2Y yield rose +3.4bp from the same-session morning baseline (11:00Z) to the 2026-09-04 close.[3] The 10Y yield rose +1bp from the same-session morning baseline (11:00Z) to the 2026-09-04 close.[4] US 2Y Treasury yield stood at 4.374% at the 2026-09-04 close snapshot around 20:00Z.[5] US 10Y Treasury yield stood at 4.782% at the 2026-09-04 close snapshot around 20:00Z.[6] If 2s10s re-steepens back above its morning baseline, or the long end sells off faster than the front, cut the flattening bias.

Payrolls and the flattener

US nonfarm payrolls for August 2026 printed 162k, released 2026-09-04 12:30Z; no consensus or prior comparison is included in the evidence set.[7] The session's front-end-led flattening may reflect the market reading the August payrolls release as trimming near-term easing urgency; if the September 11 CPI print firms, the 2s10s curve could extend its flattening.[8] We would add to the flattener only if that CPI print confirms; until then, hold the lean and add nothing.

Funding, the second risk

SOFR fixed at 3.66% for 2026-09-03.[9] IORB was 3.65% as of 2026-09-04.[10] Bank reserve balances (WRESBAL) were 2894531mn as of 2026-09-02.[11] With SOFR printing above IORB and overnight RRP take-up near zero, funding conditions may be firming as reserves drain; if repo pressure builds into quarter-end, SOFR could drift further above IORB and the desk could see richening in front-end collateral.[12] If SOFR sustains a widening premium over IORB into quarter-end, pre-position for repo richening and reduce reliance on overnight funding; unless SOFR falls back to or below IORB with RRP take-up stabilizing, keep this as the secondary risk rather than the base case.

Citations

  1. [1]The 2s10s spread flattened -2.4bp from the same-session morning baseline to the 2026-09-04 close, a curve-flattener session classification. — Observation · core:curve-reaction
  2. [2]The 2s10s spread was 40.8bp at the 2026-09-04 close. — Observation · core:curve-reaction
  3. [3]The 2Y yield rose +3.4bp from the same-session morning baseline (11:00Z) to the 2026-09-04 close. — Observation · event_window:curve:2Y
  4. [4]The 10Y yield rose +1bp from the same-session morning baseline (11:00Z) to the 2026-09-04 close. — Observation · event_window:curve:10Y
  5. [5]US 2Y Treasury yield stood at 4.374% at the 2026-09-04 close snapshot around 20:00Z. — Observation · canonical_curve:6b83abd5d0a647131a111a4b4f78c4ee:2Y
  6. [6]US 10Y Treasury yield stood at 4.782% at the 2026-09-04 close snapshot around 20:00Z. — Observation · canonical_curve:6b83abd5d0a647131a111a4b4f78c4ee:10Y
  7. [7]US nonfarm payrolls for August 2026 printed 162k, released 2026-09-04 12:30Z; no consensus or prior comparison is included in the evidence set. — Observation · economic-event:900
  8. [8]The session's front-end-led flattening may reflect the market reading the August payrolls release as trimming near-term easing urgency; if the September 11 CPI print firms, the 2s10s curve could extend its flattening. — Observation · core:curve-reaction
  9. [9]SOFR fixed at 3.66% for 2026-09-03. — NY Fed SOFR · Sep 3, 2026
  10. [10]IORB was 3.65% as of 2026-09-04. — FRED IORB · Sep 4, 2026
  11. [11]Bank reserve balances (WRESBAL) were 2894531mn as of 2026-09-02. — FRED WRESBAL · Sep 2, 2026
  12. [12]With SOFR printing above IORB and overnight RRP take-up near zero, funding conditions may be firming as reserves drain; if repo pressure builds into quarter-end, SOFR could drift further above IORB and the desk could see richening in front-end collateral. — NY Fed SOFR · Sep 3, 2026

Generated by Short Rates Desk. Informational only. Not investment advice.