TREASURY WRAP: T-NOTE FUTURES (M6) SETTLE 5+ TICKS HIGHER AT 110-11

Treasuries were bid across the curve on Tuesday, with yields declining as oil prices fell. At settlement, 2-year -0.8bps at 3.938%, 3-year -0.7bps at 3.964%, 5-year -0.7bps at 4.072%, 7-year -0.9bps at 4.244%, 10-year -1.8bps at 4.414%, 20-year -3.1bps at 4.982%, 30-year -3.2bps at 4.981%.

THE DAY: T-notes saw choppy trade but ultimately firmed, tracking weakness in crude as markets pared some of the escalation narrative seen on Monday. The US stated that the ceasefire with Iran remains in place, despite reports of further Iranian activity towards the UAE, albeit at a reduced scale compared to prior sessions. General Caine noted that recent actions remain below the threshold for a resumption of major military operations, helping to ease geopolitical risk and weigh on oil prices. However, reports do note that if operations were to resume, US and Israel  have a list of Iranian energy facilities they could target. Although, US President Trump reportedly signalled he does not want to resume a full-scale conflict with Iran. 

On the data front, releases were mixed. JOLTS job openings declined M/M but not materially, while the quits rate ticked higher, the vacancy rate edged lower, and the hire rate improved—pointing to a gradual cooling rather than a sharp deterioration in labour demand. ISM Services PMI slightly missed expectations and declined from the prior, with prices remaining elevated. The employment component improved but remained in contractionary territory.

Data triggered some intraday volatility, with Treasuries initially rallying before paring gains on headlines of renewed Iranian activity. However, T-notes stabilised into the close, ultimately settling firmer across the curve.

Overall, price action remained driven by geopolitics and oil, with softer crude supporting Treasuries. Attention remains on developments in the Middle East, alongside labour market data later in the week, with the NFP report due Friday.

SUPPLY

Bills

• US sold 3-month bills at a high rate of 3.610%, B/C 2.76x; sold 6-month bills at high rate 3.610%, B/C 2.79x
• US to sell USD 75bln of 6-week bills on May 5th; all to settle on May 7th

STIRS/OPERATIONS

• Fed Pricing: Dec +7.9bps (prev. +8.7bps)
• EFFR at 3.64% (prev. 3.64%), volumes at USD 111bln (prev. USD 115bln) on May 4th
• SOFR at 3.63% (prev. 3.64%), volumes at USD 3.113tln (prev. USD 3.15tln) on May 4th
• NY Fed RRP op demand at 1.12bln (prev. 0.62bln) across 6 counterparties (prev. 11) on May 5th