TREASURY WRAP: T-NOTE FUTURES (U6) SETTLE 17 TICKS HIGHER AT 109-21+

Yields lower across the curve as Trump touts US/Iran deal. At settlement, 2-year -9.4bps at 4.051%, 3-year -10.1bps at 4.101%, 5-year -10.8bps at 4.172%, 7-year -10.8bps at 4.305%, 10-year -10.1bps at 4.453%, 20-year -9.5bps at 4.955%, 30-year -8.4bps at 4.946%,

THE DAY: Yields moved lower across the curve on Thursday, with the move accelerating into settlement after US President Trump touted a deal with Iran and announced that planned strikes scheduled for tonight had been cancelled. The announcement saw crude prices reverse earlier gains and move sharply lower, helping Treasuries rally as investors pared inflation risk premiums tied to the conflict.

Treasuries had already been edging higher throughout the session, with the long end initially leading the move. However, Trump's comments prompted a broader rally across the curve, leaving yields 8-10bps lower by settlement, with the belly outperforming.

The market reaction has largely held, although questions remain regarding the validity of the reported agreement. Iranian and Israeli media have pushed back on reports that a deal has been reached, while officials have provided little clarification. That said, Fars reported that any proposed agreement is likely to be accepted, helping maintain optimism that a broader de-escalation may be achievable.

Elsewhere, the May PPI report was mixed, with softer core measures offset by firm headline and supercore inflation. While the data does little to alter the broader narrative that inflation remains above target, a successful agreement with Iran and a sustained decline in energy prices could help ease inflation pressures in the months ahead, particularly if the Strait of Hormuz reopens smoothly.

The USD 22bln 30-year bond auction was weak, tailing by 1.2bps and seeing a sharp decline in indirect demand. The result suggests investor appetite for duration remains fragile despite yields remaining near 5%, with dealers left holding a well-above-average share of the issue.

SUPPLY

Notes

• US sold USD 22bln of 30-year bonds; Tail 1.2bps
• US Treasury to sell USD 13bln of 20-year bonds on June 16th, to settle June 22nd; to sell USD 24bln of 5-year TIPS on June 18th, to settle June 30th

Bills

• US sold 4-week bills at a high rate of 3.595%, B/C 3.13x; sold 8-week bills at a high rate 3.610%, B/C 2.94x
• US to sell USD 89bln of 13-week bills, and USD 77bln of 26-week bills on June 15th, to settle on June 18th
• US to sell USD 65bln of 6-week bills on June 16th, to settle on June 18th

STIRS/OPERATIONS

• Fed Pricing: 18.5bps (prev. Dec 24.9bps)
• EFFR at 3.62% (prev. 3.62%), volumes at USD 106bln (prev. USD 106bln) on June 10th
• SOFR at 3.59% (prev. 3.60%), volumes at USD 3.023tln (prev. USD 3.063tln) on June 10th
• NY Fed RRP op demand at 0.46bln (prev. 0.39bln) across 3 counterparties (prev. 4) on June 11th
• NY Fed T-bill Schedule: Plans to conduct approximately USD 16.5bln in reinvestment purchases and an additional approximately USD 10bln in reserve management purchases over the noted monthly period