TREASURY WRAP: T-NOTE FUTURES (H6) SETTLE 12 TICKS HIGHER AT 113-05+

Analysis details (20:28)

T-notes bull steepen after soft CPI, led by the short-end. At settlement,  2-year −5.4bps at 3.412%, 3-year −6.0bps at 3.450%, 5-year −5.9bps at 3.609%, 7-year −5.8bps at 3.814%, 10-year −4.8bps at 4.056%, 20-year −3.3bps at 4.643%, 30-year −3.1bps at 4.698%,

THE DAY: T-notes were lower across the curve on Friday, particularly in the long-end seeing the curve bull steepen. Price action was largely a function of the US CPI report, which saw core metrics in line with forecasts, but headline prints were lower than expected.  T-notes saw choppy trade in response to the data but ultimately moved higher and held onto the gains. The soft CPI report was not enough for banks to bring forward their Fed rate cut calls however, with many pushing back rate cut expectations after the strong January NFP report. However, money markets have grown more optimistic on 2026 rate cuts, pricing in ~40% chance of a third 25bps Fed rate cut this year. Nonetheless, an economy showing a robust labour market and cooling inflation is very welcome news for the Fed. With inflation still above target, and the labour market holding up, it allows the Fed to continue with its pause in rate cuts. Markets are not expecting rate cuts to resume until the Summer, when Warsh (if successfully nominated by the Senate) takes the helm from Fed Chair Powell. A key risk is whether or not Fed Chair Powell decides to stay on as governor after his term as Chair expires in May. He has not given any hints about what he will choose to do yet. Next week, attention turns to GDP and PCE data (albeit for December on account of government shutdowns), as well as 20-year supply and 30-year TIPS. 

SUPPLY

Bills

• US to sell USD 90bln of 6-week bills, USD 89bln of 13-week bills, USD 77bln of 26-week bills and USD 52bln of 52-week bills on February 17th; all to settle Feb 19th.

Notes

• US Treasury to sell USD 16bln of 20-year bonds on Wednesday February 18th, and USD 9bln of 30-year TIPS on Thursday February 19th

STIRS/OPERATIONS

• Market Implied Fed Rate Cut Pricing: March 1.3bps (prev. 1.3bps), April 6.2bps (prev. 4.2bps), June 21.2bps (prev. 16.9bps), December 62.2bps (prev. 52.3bps).


• NY Fed RRP op demand at USD 0.4bln (prev. 2.84bln) across 3 counterparties (prev. 10)


• EFFR at 3.64% (prev. 3.64%), volumes at USD 97bln (prev. 101bln) on February 12th


• SOFR at 3.65% (prev. 3.65%), volumes at USD 3.205tln (prev. 3.167tln) on February 12th

13 Feb 2026 - 20:28- ForexData- Source: Newsquawk