TREASURY WRAP: T-NOTE FUTURES (U5) SETTLES 14+ TICKS LOWER AT 110-19+

Analysis details (20:15)

Treasuries sold with the rally in crude, stoking inflationary fears. At settlement, 2s +5.2bps at 3.958%, 3s +5.7bps at 3.918%, 5s +6.2bps at 4.021%, 7s +6.4bps at 4.208%, 10s +6.7bps at 4.424%, 20s +7.8bps at 4.933%, 30s +7.1bps at 4.914%.

INFLATION BREAKEVENS: 5yr BEI +3.8bps at 2.326%, 10yr BEI +2.8bps at 2.286%, 30yr BEI +2.8bps at 2.275%.

THE DAY: Upon Israel hitting Iran overnight, T-Notes saw swift upside to session highs of 111-13 from 111-03+ given the immediate risk-off trade across markets. In the European session, participants digested the inflationary angle associated with surging crude prices in response to the warfare, resulting in a gradual move lower in T-Notes for the remainder of the day to eventual lows of 110-14. The move lower was typically unusual for Treasuries, given the typical haven bid that normally follows on such a day, with participants placing more significance on upward inflationary pressures. Fed pricing saw a slight hawkish move, albeit 50bps of easing by year-end remains at play. Elsewhere, UoM prelim (June) saw sentiment, conditions, and expectations all top expectations, with the 1-yr inflation expectation falling to 5.1% (prev. 6.6%) and the 5yr ticking lower to 4.1% (prev. 4.2%)

STIRS/OPERATIONS

• Market Implied Fed Rate Cut Pricing: June 0bps (prev. 0bps), July 6bps (prev. 6bps), September 21bps (prev. 23bps), Dec 50bps (prev. 53bps).


• NY Fed RRP op demand at USD 169bln (prev. 181bln) across 27 counterparties (prev. 34).


• EFFR at 4.33% (prev. 4.33%), volumes at USD 114bln (prev. 111bln).


• SOFR at 4.28% (prev. 4.28%), volumes at USD 2.663tln (prev. 2.600tln).

13 Jun 2025 - 20:15- ForexResearch Sheet- Source: Newsquawk