TREASURY WRAP: T-NOTE FUTURES (M6) SETTLE 12 TICKS HIGHER AT 111-07+

Analysis details (20:25)

Yield curve steepens on US/Iran ceasefire agreement. At settlement, 2-year −0.8bps at 3.792%, 3-year −0.8bps at 3.812%, 5-year −2.0bps at 3.918%, 7-year −1.5bps at 4.100%, 10-year −1.2bps at 4.289%, 20-year −0.6bps at 4.873%, 30-year +0.9bps at 4.887%.

THE DAY: The Treasury curve steepened on Wednesday, reversing some of the recent flattening, with front-end yields leading the move lower as oil prices tumbled following reports of a two-week ceasefire agreement between the US and Iran, alongside Iran agreeing to reopen the Strait of Hormuz. The move reflected easing inflation concerns and a pullback in hawkish Fed pricing.

Price action was largely driven by geopolitics. Some of the initial moves pared as reports of continued strikes in Iran and Lebanon raised doubts about the durability of the ceasefire, while Iran re-halted traffic through the Strait again and threatened to withdraw from the agreement.

The 10-year auction earlier in the session was mixed, with a modest tail and softer bid-to-cover, although a rebound in direct demand suggested domestic real money participation improved despite ongoing volatility (more below).

Looking ahead, focus remains on geopolitics, alongside key Treasury supply with the 30-year auction still to come. Inflation data will also be in focus, with CPI and PCE due. Headline CPI is expected to rise 1.0% M/M, with the Y/Y rate seen at 3.3% (prev. 2.4%), largely driven by energy prices. Core CPI is seen at 0.3% M/M and 2.7% Y/Y, while core PCE (Feb) is expected at 0.4% M/M and 3.0% Y/Y.

SUPPLY

• US to sell USD 22bln of 30-year bonds on April 9th; all to settle April 15th


• 
  Overall, a mixed but slightly improved 10-year auction. The US Treasury sold USD 39bln of 10-year notes at a high yield of 4.282%, above both the prior 4.217% and the 4.132% six-auction average. The auction tailed the WI by 0.2bps, an improvement from the prior 0.7bps tail and broadly in line with the six-auction average. The bid-to-cover slipped to 2.43x from 2.45x, below the 2.49x average, pointing to slightly softer overall demand. The composition showed a notable shift from the 3-year auction on Tuesday. Direct demand rose sharply to 23.88% from 12.8%, suggesting domestic real money accounts returned to the market, likely supported by the improved geopolitical backdrop. In contrast, indirect demand fell to 65.32% from 74.5%, retracing the strong foreign participation seen previously. Dealer take came in at 10.8%, down from 12.8% and close to the 9.8% average. Overall, the auction suggests a rotation back towards domestic demand as conditions stabilise, although the softer bid-to-cover highlights that demand remains somewhat cautious.

Bills

• US to sell USD 75bln of 8-wk bills and USD 80bln of 4-wk bills on April 9th; all to settle April 14th


• US sold 17-wk bills at high-rate 3.600%, B/C 3.34x

STIRS/OPERATIONS

• Fed Money Market Pricing (D/D): April +1.8bps, June +1.8bps, July +1.3bps, Dec -4.7bps


• NY Fed RRP op demand at USD 0.18bln (prev. 15.35bln) across 4 counterparties (prev. 22) on April 8th


• SOFR at 3.62% (prev. 3.65%), volumes at USD 3.26tln (prev. USD 3.217tln) on April 7th


• EFFR at 3.64% (prev. 3.64%), volumes at USD 106bln (prev. USD 103bln) on April 7th

08 Apr 2026 - 20:25- ForexGeopolitical- Source: Newsquawk