TREASURY WRAP: T-NOTE FUTURES (U6) SETTLE 12+ TICKS LOWER AT 108-16

Treasury yields rose on higher oil prices, hawkish Fed reports, strong economic data and Alphabet's bond sale. At settlement, 2-year +6.5bps at 4.250%, 3-year +6.9bps at 4.307%, 5-year +6.5bps at 4.391%, 7-year +6.3bps at 4.526%, 10-year +5.7bps at 4.672%, 20-year +5.2bps at 5.220%, 30-year +4.7bps at 5.214%.

THE DAY: Treasuries were sold across the curve on Thursday, with the curve bear flattening as the front end underperformed. Firmer oil prices, hawkish Fed reports, encouraging economic data and Alphabet's (GOOGL) large corporate bond sale all contributed to the move.

Oil prices moved higher as tensions between the Houthis and Saudi Arabia escalated, while the initial Iranian reporting on the proposed Iran-Oman framework suggested terms viewed as unfavourable to the US and its allies, raising doubts over the prospects of a final agreement and rebuilding some geopolitical risk premium in crude.

The front end also came under pressure following a Financial Times report, citing Fed sources, that Chair Warsh intends to maintain his communication strategy despite recent criticism. The report added that Warsh would be willing to raise rates in September should upcoming inflation data surprise to the upside and market pricing move further in that direction, helping lift short-end yields.

Alongside the broader macro drivers, Alphabet (GOOGL) filed for a 10-part bond offering, reportedly targeting around USD 25bln of issuance after attracting approximately USD 115bln in investor demand. The associated rate-locking activity likely added to the pressure on Treasury prices.

Economic data also painted a resilient picture of the US economy. Initial jobless claims remained near multi-decade lows, productivity exceeded expectations and unit labour costs rose by less than forecast, while Challenger reported fewer layoffs in July than in June. Attention now turns to Friday's nonfarm payrolls report, before next week's CPI release. The inflation report will receive particular scrutiny following the Financial Times report, given a stronger-than-expected CPI print could further increase expectations for a September rate hike, although policymakers will still receive additional labour market and inflation data before that meeting.

• US sold 4-week bills at a high rate of 3.640%, B/C 2.68x; sold 8-week bills at a high rate of 3.710%, B/C 2.74x
• US to sell USD 92bln of 13-week bills and USD 79bln of 26-week bills on August 10th; to sell USD 95bln of 6-week bills on August 11th; all to settle on August 13th

• Fed Pricing via CME Fed Watch: Sept 14.18bps (prev. 13.7bps), Dec 33.9bps (prev 30.4bps).
• EFFR at 3.63% (prev. 3.63%), volumes at USD 114bln (prev. USD 117bln) on August 5th.
• SOFR at 3.64% (prev. 3.66%), volumes at USD 2.989tln (prev. USD 3.036tln) on August 5th.
• NY Fed RRP op demand at 1.43bln (prev. 1.65bln) across 6 counterparties (prev. 2) on August 6th.
• Treasury Buyback [Liquidity Support, 1mth-2year, Max USD 4bln]: Accepts USD 4bln of USD 35.786bln offered, accepts 15 of 61 eligible issues. Offer to cover 8.95x