TREASURY WRAP: T-NOTE FUTURES (M6) SETTLE 16 TICKS LOWER AT 110-11+

Yields rose across the curve as oil gained after Trump rejected Iran's proposal while Fed hawks dissented on easing language bias. At settlement, 2-year +9.3bps at 3.935%, 3-year +8.7bps at 3.952%, 5-year +7.9bps at 4.058%, 7-year +8.1bps at 4.236%, 10-year +6.0bps at 4.410%, 20-year +6.1bps at 4.985%, 30-year +4.5bps at 4.984%.

THE DAY: Ahead of the FOMC, yields pushed higher across the curve as crude prices extended gains. The move was driven by escalating geopolitical tensions, with reports that President Trump is preparing for a prolonged blockade of Iran and has been in discussions with oil executives about extending restrictions for months. Meanwhile, Iranian state media warned that continued US maritime actions could be met with “unprecedented” military responses. Further headlines from N12 and Axios’ Barak Ravid noted Trump has rejected Iran’s latest proposal, stating that the naval blockade will remain in place until US concerns around Iran’s nuclear programme are addressed.

The upside in yields was also supported by firm US data. Housing starts beat expectations, while durable goods were strong across the board, pointing to resilient growth, although building permits disappointed. The goods trade deficit widened more than expected, while wholesale inventories also topped forecasts, with the Atlanta Fed GDPNow estimate holding at 1.2%.

Yields extended highs following the FOMC decision, where the Fed left rates unchanged as expected. Miran dissented in favour of a 25bps cut, while hawkish dissent from Logan, Hammack, and Kashkari opposed maintaining the easing bias in the statement. The statement also upgraded its inflation language to “elevated” from “somewhat elevated,” while Powell noted some non-voting members also favoured removing the easing bias. Despite the initial hawkish interpretation, yields pared slightly into the close as Powell reiterated that policy is well positioned to remain in a wait-and-see mode, emphasising that no one is calling for a hike now. 

SUPPLY

Bills

• US sold 6-wk bills at high-rate 3.590%, B/C 3.14x
• US sold USD 69bln 17-week bills on 29th April
• US to sell USD 80bln of 4-week and USD 75bln of 8-week bills on 30th April; to settle 5th May

STIRS/OPERATIONS

• Fed Pricing: June +1.9bps, July +0.8bps, Sept +0.8bps, Dec +3.3bps
• NY Fed RRP op demand at 0.75bln (prev. 0.64bln) across 5 counterparties (prev. 6) on April 29th
• SOFR at 3.64% (prev. 3.66%), volumes at USD 3.021tln (prev. USD 3.058tln) on April 28th
• EFFR at 3.64% (prev. 3.64%), volumes at USD 82bln (prev. USD 85bln) on April 28th