TREASURY WRAP: T-NOTE FUTURES (M6) SETTLE 5+ TICKS HIGHER AT 111-07
Treasuries were firmer across most of the curve on Friday, with yields steepening led by the front-end. At settlement, 2-year -5.6bps at 3.776%, 3-year -4.8bps at 3.797%, 5-year -4.4bps at 3.911%, 7-year -3.2bps at 4.097%, 10-year -2.3bps at 4.302%, 20-year -1.6bps at 4.887%, 30-year -0.4bps at 4.910%.
THE DAY: T-notes traded sideways overnight and through the European morning before rallying in the US session as crude prices declined on reports of a potential breakthrough in US/Iran negotiations. The initial upside faded on headlines suggesting top Iranian negotiator Ghalibaf could resign from talks, although this was later denied, allowing Treasuries to return higher. Further support came after US media reported that President Trump is sending envoys Witkoff and Kushner to engage with the Iranian foreign minister, reinforcing hopes for progress.
T-notes were also supported by reports, that were ultimately confirmed, that the criminal probe into Fed Chair Powell and Fed rennovation costs has been dropped. However, Press Secretary Leavitt suggested the probe is still ongoing.
Overall, price action was dictated by moves in crude and shifting geopolitical headlines, with easing oil prices supporting the front-end via lower inflation expectations.
On the data front, the University of Michigan survey showed consumer sentiment declining, though by less than expected, with both current conditions and expectations falling but printing above forecasts. The release had little impact on Treasuries, with markets continuing to look through data. Note, the UoM inflation expectations rose, with the one-year ahead reading at 4.7% from 3.8% prior, just below the 4.8% consensus, while the longer-term measure rose to 3.5% from 3.2%, above the 3.4% consensus.
Looking ahead, focus turns to a busy week of central bank meetings, including the Fed, alongside upcoming Treasury supply. In the near-term, attention remains on developments in US/Iran talks over the weekend.
SUPPLY
Notes
- US to sell USD 69bln 2-year notes on April 27th, to sell USD 70bln 5-year notes on April 27th, to sell USD 44bln 7-year on April 28th, to sell USD 30bln 2yr FRN on April 28th
Bills
- US to sell USD 77bln of 26-week bills and USD 89bln of 13-week bills on April 27th. To sell USD 70bln of 6-week bills on April 28th; all to settle April 30th.
STIRS/OPERATIONS
- Fed Money Market Pricing (D/D): April +1.8bps (prev. +1.8bps), June 0.6bps (prev. +1.8bps), July -2.2bps (prev. -0.7bps), Dec -10.4bps (prev. -5.3bps)
- NY Fed RRP op demand at 0.08bln (prev. 0.11bln) across 4 counterparties (prev. 7) on April 24th
- SOFR at 3.65% (prev. 3.64%), volumes at USD 3.011tln (prev. USD 2.96tln) on April 23rd
- EFFR at 3.64% (prev. 3.64%), volumes at USD 93bln (prev. USD 89bln) on April 23rd
The recent performance in Treasury markets, with T-note futures settling higher, reflects a complex interplay of geopolitical developments and inflation expectations. The decline in crude prices suggests easing inflation pressures, enhancing demand for Treasuries, while ongoing dialogues regarding US-Iran relations and the dropping investigation into Fed Chair Powell bolster market confidence. As central bank meetings loom, market participants will likely remain attentive to these geopolitical and economic cues as they assess future rate path implications.