TREASURY WRAP: T-NOTE FUTURES (U5) SETTLE 16 TICKS LOWER AT 110-23

Analysis details (20:36)

T-notes sold across the curve following more tariff announcements from Trump. At settlement, 2-year +3.4bps at 3.902%, 3-year +4.1bps at 3.876%, 5-year +5.6bps at 3.987%, 7-year +7.1bps at 4.192%, 10-year +7.9bps at 4.425%, 20-year +9.9bps at 4.958%, 30-year +10.1bps at 4.963%.

INFLATION BREAKEVENS: 1-year BEI +4.2bps at 2.747%, 3-year BEI +4.4bps at 2.558%, 5-year BEI +4.8bps at 2.460%, 10-year BEI +3.1bps at 2.372%, 30-year BEI +2.4bps at 2.321%.

THE DAY: T-notes were lower across the curve on Friday, with the curve steepening. The downside was predominantly led by the long-end, with the short-end only slightly lower on the session. Weakness largely stemmed from Trump's fresh tariff announcements: 35% on Canada, and we are still awaiting the EU rate at the time of writing. There was no tier 1 data on Friday, although the Budget data posted a surplus, driven by higher tariff revenue. As mentioned, the downside started overnight after Trump announced a 35% tariff on Canada from 1st August, but the weakness extended throughout the session in anticipation of the EU tariff announcement. This also pressured bunds, which took T-notes down with them, while Gilts also pressured US debt. In the UK, GDP data disappointed, which initially led to upside in Gilts, but this faded as lower growth and thus lower tax revenues are likely to put further pressure on Chancellor Reeves' fiscal headroom. In the wake of the Canada announcement and in anticipation of the EU tariff, inflationary fears were high, with the inflation breakeven yields rising, particularly in the short end. In late trade, T-notes settled at lows amid commentary from Fed's Gooslbee, warning of another delay to rate cuts given Trump's latest Tariff updates.  

SUPPLY

Bills

• US Treasury to sell USD 82bln of 13-week bills and USD 73bln of 26-week bills on July 14th; to sell USD 70bln (prev. 50bln) of 6-week bills on July 15th; all to settle July 17th

STIRS/OPERATIONS:

• Market Implied Fed Rate Cut Pricing: July 2bps (prev. 2bps), September 18bps (prev. 18bps), Oct 32bps (prev.  34bps), Dec 50bps (prev. 52bps).


• NY Fed RRP Op demand at USD 182bln (prev. 183bln) across 37 counterparties (prev. 36)


• EFFR at 4.33% (prev. 4.33%), volumes at USD 106bln (prev. 105bln) on July 10th.


• SOFR at 4.31% (prev. 4.32%), volumes at USD 2.735tln (prev. 2.752tln) on July 10th.

11 Jul 2025 - 20:36- ForexGeopolitical- Source: Newsquawk