TREASURY WRAP: T-NOTE FUTURES (M5) SETTLE 1+ TICKS LOWER AT 109-01

Yields finish little changed but off session highs as Trump pushes de-escalation efforts. At settlement, 2-year +0.8bps at 4.153%, 3-year +0.3bps at 4.203%, 5-year +0.7bps at 4.278%, 7-year +1.3bps at 4.410%, 10-year +1.6bps at 4.548%, 20-year +1.6bps at 5.037%.

THE DAY: Yields moved modestly higher across the curve on Monday as oil prices rallied following a fresh exchange of strikes between Israel and Iran over the weekend. The escalation saw crude gap higher at the reopen of trade, lifting Treasury yields as markets priced a greater risk of a prolonged conflict and the potential for higher inflation pressures.

However, President Trump later called on both sides to exercise restraint, helping ease some of the geopolitical risk premium. Reports during the European session suggested the US and Israel had agreed not to strike Iran, while Iran had also agreed to suspend military operations against Israel, although Tehran warned it would respond if Israeli attacks on Hezbollah in Lebanon continued.

The apparent pause in hostilities saw crude prices retreat from overnight highs, allowing Treasury yields to pare earlier gains, seeing rates still finished little changed across the curve.

The data highlight on Monday was the New York Fed's consumer inflation expectations survey, which showed one-year inflation expectations easing to 3.5% in May from 3.6%, while three- and five-year expectations were unchanged at 3.1% and 3.0%, respectively. The release generated little market reaction.

The Fed remains in blackout ahead of the June 17th FOMC meeting, the first under Chair Kevin Warsh. Attention this week turns to CPI and PPI, while Treasury supply will also remain in focus.

SUPPLY

Notes

• US Treasury to sell USD 58bln of 3-year notes on June 9th, USD 39bln of 10-year notes on June 10th and USD 22bln of 30-year bonds on June 11th

Bills

• US sold 6-month bills at a high rate of 3.640%, B/C 2.79x, sold 6-month bills at a high rate of 3.690%, B/C 2.75x
• US to sell USD 65bln of 6-week bills on June 9th
• US to sell USD 59bln of 52-week bills on June 9th.

STIRS/OPERATIONS

• Fed Pricing: 27.1bps (prev. Dec 27.5bps)
• EFFR at 3.62% (prev. 3.62%), volumes at USD 117bln (prev. USD 121bln) on June 5th
• SOFR at 3.63% (prev. 3.62%), volumes at USD 3.131tln (prev. USD 3.147tln) on June 5th
• NY Fed RRP op demand at 1.83bln (prev. 0.76bln) across 16 counterparties (prev. 5) on June 8th