TREASURY WRAP: T-NOTE FUTURES (U6) SETTLE 17+ TICKS LOWER AT 108-00

Treasuries again saw a steeper curve amid month-end. 2-year +4.1bps at 4.291%, 3-year +5.8bps at 4.357%, 5-year +6.7bps at 4.458%, 7-year +7.2bps at 4.601%, 10-year +7.2bps at 4.745%, 20-year +7.0bps at 5.295%, 30-year +6.2bps at 5.275%.

DAY: The Treasury curve steepened as volatility resumed at month-end.Unlike the past couple of days, this time short-end yields rose, helped by the modest crude gains, albeit still to a lesser magnitude than the belly and long end.

Today's main development was the continued sharp drawdowns in USD/JPY that again stoked fresh JPY intervention speculation. As such, the move higher in yields would have likely been a function of either anticipation that Japan will be selling Treasuries to support the JPY or Japan actually doing it themselves. Meanwhile, reports noted that the US Treasury has informed banks that it may intervene in the Yen market on Friday; later reports said some banks were told to have executable trades ready to exchange JPY for euros.

In other news, Fed 2026 voters Hammack, Logan, and Kashkari all gave their reasoning behind opting for a 25bps rate hike at this week's meeting. They argued that inflation remains too persistent, current policy is not restrictive enough, and with the labour market still solid, a precautionary 25bps hike now would help prevent inflation from becoming entrenched and reduce the risk of needing larger rate increases later; T-Notes were muted on the speeches.

UoM Final June showed improved sentiment; however,  consumers remain focused on pocketbook issues like purchasing power, while political or military developments remain more in the background.

• Fed Pricing: 24.2bps (prev. Dec 20.1bps)
• EFFR at 3.63% (prev. 3.63%), volumes at USD 121bln (prev. USD 101bln) on July 30th
• SOFR at 3.65% (prev. 3.65%), volumes at USD 3.011tln (prev. USD 3.032tln) on July 30th
• NY Fed RRP op demand at 2.151bln (prev. 1.076bln) across 4 counterparties (prev. 3) on July 31st