TREASURY WRAP: T-NOTE FUTURES (M5) SETTLE 9 TICKS LOWER AT 113-15

Analysis details (20:33)

T-Notes were sold on Friday as strong regional bank earnings helped ease some credit fears, while Trump was optimistic on China. At settlement, 2-year +3.5bps at 3.462%, 3-year +3.8bps at 3.467%, 5-year +3.8bps at 3.588%, 7-year +3.5bps at 3.777%, 10-year +2.7bps at 4.003%, 20-year +1.8bps at 4.570%, 30-year +1.6bps at 4.599%.

INFLATION BREAKEVENS: 1-year BEI -0.7bps at 3.187%, 3-year BEI +0.3bps at 2.586%, 5-year BEI +0.2bps at 2.325%, 10-year BEI -0.6bps at 2.253%, 30-year BEI -0.7bps at 2.203%.

THE DAY: T-notes sold off across the curve on Friday as strong regional bank earnings quelled some of the Thursday fears. The earnings saw the regional  banking ETF rise on Friday, albeit still much lower than before Thursday's sell-off. T-notes fell from overnight peaks of 114-02, a level not seen since April 2025, when Trump announced his trade policies. On trade today, he was rather optimistic, reiterating that things will be fine with China and that he doubts the high tariffs on China will come into effect. There was no data today, but Bloomberg, citing state data, noted initial jobless claims fell in the latest week to 215k from an estimated 234k in the prior week. Meanwhile, Fed speak saw remarks from Musalem (2025 voter) during the session, who said he could support another rate cut if more risks to the jobs market emerge and inflation is contained. Kashkari (2026 voter), in after-hours on Thursday, said if the Fed prioritises the labour market over inflation control, it could lead to bad outcomes for workers. Elsewhere, in funding markets, SOFR remained above the Fed target rate on October 16th, ticking up to 4.30% from 4.29% D/D, suggesting ongoing liquidity concerns. Usage of the Reverse Repo facility at the NY Fed (where participants park excess cash) has diminished drastically recently, falling to c. USD 4bln from the roughly USD 200bln figures seen in July. With excess cash seemingly scarce, usage of the standard repo facility (where participants borrow extra cash from the Fed) had accelerated in recent sessions, rising to USD 8.35bln yesterday, from USD 6.75bln on October 15th - both above the Q3 quarter-end spike of USD 6bln, and rising to the highest levels since 2020. However, there was no usage in today's standard repo operation. Attention next week turns to the US CPI on Friday and the Treasury supply. 

SUPPLY

Notes

• US Treasury to sell USD 13bln of 20-year bonds on October 22nd and USD 26bln of 5-year TIPS on October 23rd; all to settle October 31st.

Bills

• US Treasury to sell USD 86bln of 13-week bills and USD 77bln of 26-week bills on October 20th, to sell USD 95bln of 6-week bills on October 21st; all to settle October 23rd.

STIRS/OPERATIONS

• Market Implied Fed Rate Cut Pricing: Oct 25bps (prev. 26bps), Dec 50bps (prev. 53bps), January 65bps (prev. 69bps).


• NY Fed RRP op demand at USD 4bln (prev. 7bln) across 6 counterparties (prev. 11)


• EFFR at 4.11% (prev. 4.10%), volumes at USD 85bln (prev. 81bln) on October 16th.


• SOFR at 4.30% (prev. 4.29%), volumes at USD 3.045tln (prev. 3/059tln) on October 16th.

17 Oct 2025 - 20:33- ForexData- Source: Newsquawk