TREASURY WRAP: T-NOTE FUTURES (H6) SETTLE 7+ TICKS HIGHER AT 111-21

Analysis details (20:31)

T-Notes gain as US-EU tensions ease after Trump walks back tariff threat on the EU. At settlement, 2-year -0.8bps at 3.597%, 3-year -2.0bps at 3.664%, 5-year -2.5bps at 3.833%, 7-year -3.7bps at 4.039%, 10-year -4.4bps at 4.255%, 20-year -5.2bps at 4.829%, 30-year -4.4bps at 4.872%.

THE DAY: T-Notes spent overnight and European trade in fairly contained ranges with participants lacking conviction on either direction. Despite the rebound in US equities at the open after US President Trump downplayed "force against NATO", USTs failed to hold onto any sizable rally until later in the session. The US 20yr bond auction was encouraging, given concerns surrounding reliance on debt funded by the RoW. Indirect bids little changed while direct's stepped up their bid proportion, leaving dealers with 6.2% of the bid, beneath the six-auction average. The focus was and still is Greenland, with the absence of US data and Fedspeak doing little to change the current theme. Equities rebound was later pressured by Denmark's rejection of Trump's demand to negotiate the takeover of Greenland - T-notes chopped eventually resuming higher. Later, Trump U-turned on his tariff threat on EU nations over Greenland, citing a very productive meeting with NATO's Secretary General Rutte, which led to the formation of a framework for a future deal - T-notes extended higher, hitting highs of 111-22. Arguments were heard from Fed's Cook and Trump's team at the US Supreme Court, with reporting siding with Cook, as SCOTUS seems likely to rule in the Governor's favour; USTs were unfazed by the reports. Tier 1 data returns on Thursday, PCE (Nov), GDP Final (Q3), and claims will be watched.

SUPPLY

Bonds

• Overall, a strong auction, highlighted by all internals. The stop-through of 1bps was both larger than the prior 0.1bps and the six-auction average of 0.5bps. B/C rose to 2.86x from 2.67x. The bid breakdown saw a drop in dealer take to 6.2% from 12.6%, beneath the 10.9% average. This came as a result of a rise in direct demand to 29.1% from 22.2%, now above the 25.7% average. Meanwhile, indirect take was little changed at 64.7%, down from the 65.2% prior, but still above the 63.5% average.

Bills

• US sold 17-week bills at a high rate of 3.580%, B/C 2.99x

STIRS/OPERATIONS

• Market Implied Fed Rate Cut Pricing: January 0bps (prev. 0bps), March 3.3bps (prev. 4.5bps), April 7.7bps (prev. 9.3bps), December 44.9bps (prev. 45.7bps)


• NY Fed RRP op demand at 3.34bln (prev. 3.51bln) across 12 counterparties (prev. 16)


• EFFR at 3.64% (prev. 3.64%), volumes at USD 83bln (prev. 84bln) on January 20th


• SOFR at 3.64% (prev. 3.65%), volumes at USD 3.162tln (prev. 3.163tln) on January 20th

21 Jan 2026 - 20:31- ForexGeopolitical- Source: Newsquawk