TREASURY WRAP: T-NOTE FUTURES (H6) SETTLE 6+ TICKS LOWER AT 112-16+

Analysis details (20:12)

T-notes sold across the curve amid a chunky slew of block trades, US data, commentary from Hassett and a stellar Canadian jobs report. At settlement, 2-year +3.6bps at 3.567%, 3-year +3.7bps at 3.590%, 5-year +3.4bps at 3.717%, 7-year +3.0bps at 3.909%, 10-year +3.3bps at 4.141%, 20-year +3.4bps at 4.757%, 30-year +3.0bps at 4.794%.

INFLATION BREAKEVENS: 1-year BEI +0.8bps at 2.743%, 3-year BEI +2.0bps at 2.466%, 5-year BEI +0.4bps at 2.263%, 10-year BEI +0.0bps at 2.253%, 30-year BEI +0.0bps at 2.228%.

THE DAY: T-notes were sold across the curve on Friday with yields 3-4bps firmer across maturities. A lot of the focus was on the US data, which saw US PCE mostly in line with expectations (core Y/Y slightly soft), while UoM sentiment beat expectations with a drop in both inflation expectations. The data did little to shape Fed expectations. However, T-notes started to rise on little news just ahead of the cash equity open before then reversing ahead of the US data. The data supported T-notes briefly, but better selling resumed thereafter across the curve. There was little fresh US news driving prices lower, but there were several, very chunky block trades (see below) likely behind the movement. Meanwhile, Canadian bonds were sold hard with markets now fully pricing in a 25bps hike in 2026 from the BoC after a stellar jobs report which saw the unemployment rate drop to 6.5% from 6.9%. T-notes settled around lows, but it is worth noting that in wake of the US data, there was a downward revision to the Atlanta Fed GDPNow model to 3.5% from 3.8% for Q3, while the NY Fed Nowcast for Q4 fell to 1.73% from 2.33%, albeit it did little to stop the Treasury downside. There was also commentary from NEC Director, or "potential Fed Chair", Hassett, who perhaps wasn't as dovish as you would expect. He said it is time for the Fed to "cautiously" reduce rates. A cautious approach would differ from one that Trump favours and be more aligned with some of the commentary from current Fed officials. However, he said he did agree with Bessent's view on Fed Reserve Bank Presidents - that they should be living in a district for three years before being a Fed president. The criticism against regional Fed presidents further raises concerns over Fed independence, particularly when it is the regional Fed presidents who are leaning more hawkish than the board of Governors. 

SUPPLY:

Notes

• US to sell USD 58bln of 3-year notes on 8th Dec.


• US to sell USD 39bln in 10-year notes on 9th Dec.


• US to sell USD 22bln of 30-year bonds on Dec 11th.

Bills

• US to sell USD 75bln of 6-week bills on December 9th


• US to sell USD 86bln of 13-week bills on December 8th.


• US to sell USD 77bln of 26-week bills on December 8th.

STIRS/OPERATIONS

• Market Implied Fed Rate Cut Pricing: Dec 21.07bps (prev. 21.3bps), January 29.15bps (prev. 29.6bps), March 36.3bps (prev. 36.7bps).


• NY Fed RRP op demand at USD 1.5bln (prev. 2.2bln) across 8 counterparties (prev. 39)


• NY Fed Repo Op demand at USD 0.002bln (prev. 0.002bln) across two operations.


• EFFR at 3.89% (prev. 3.89%), volumes at USD 87bln (prev. 85bln) on December 4th.


• SOFR at 3.92% (prev. 3.95%), volumes at USD 3.300tln (prev. 3.360tln) on December 4th.

BLOCK TRADES

• 10:05EDT/15:05BST: 45.0k 5-Year T-Note Futures (ZFH6) at 109-110


• 09:47EDT/14:47BST: 10.0k 10-Year T-Note Futures (ZNH6) at 112-235


• 09:41EDT/14:41BST: 25.0k 5-Year T-Note Futures (ZFH6) at 109-117


• 09:21EDT/14:21BST: 7.0k 5-Year T-Note Futures (ZFH6) at 109-135


• 09:13EDT/14:13BST: 20.0k 10-Year T-Note Futures (ZNH6) at 112-240


• 08:40EDT/13:40BST: 20.0k 5-Year T-Note Futures (ZFH6) at 109-110


• 08:32EDT/13:32BST: 5.0k 5-Year T-Note Futures (ZFH6) at 109-110


• 08:31EDT/13:31BST: 25.0k 10-Year T-Note Futures (ZNH6) at 112-225

05 Dec 2025 - 20:12- ForexData- Source: Newsquawk