TREASURY WRAP: T-NOTE FUTURES (U6) SETTLE 2+ TICKS LOWER AT 110-06

T-notes were little changed on Monday despite higher oil prices as markets balanced renewed geopolitical tensions ahead of Fed Chair Warsh and NFP this week. At settlement, 2-year +1.3bps at 4.109%, 3-year +1.1bps at 4.106%, 5-year +1.0bps at 4.144%, 7-year +0.2bps at 4.247%, 10-year -0.2bps at 4.374%, 20-year -0.7bps at 4.864%, 30-year -0.7bps at 4.860%.

THE DAY: Treasury yields finished little changed across the curve on Monday despite gains in crude prices following renewed tensions between the US and Iran. The lack of tier-one economic data kept trading relatively subdued, with attention on Fed Chair Warsh at Sintra this week and the June NFP report on Thursday.

Fed commentary was limited. Overnight, Barkin reiterated that inflation remains too high, although he acknowledged there are signs that price pressures could moderate in the coming months. Elsewhere, the Supreme Court ruled that President Trump cannot remove Fed Governor Cook from office, denying the administration's application. Cook welcomed the decision, saying it reinforces the importance of Federal Reserve independence.

The rise in oil prices was driven by fresh geopolitical escalation over the weekend. The US reportedly struck multiple Iranian targets after Iran attacked a Panama-flagged tanker in the Strait of Hormuz, before Iran responded with strikes against US military bases across the Gulf region. Markets also digested conflicting reports surrounding diplomacy, with US officials stating talks with Iran are scheduled to take place in Doha on Tuesday, while Iranian officials pushed back against suggestions that formal negotiations are planned this week. Both US and Iranian officials are expected to be in Doha, however.

Looking ahead, market attention now turns to Thursday's US nonfarm payrolls report, brought forward due to the Independence Day holiday on Friday. Investors will also closely watch Chair Warsh's appearance at the ECB's Sintra Forum. At the recent FOMC press conference, Warsh reinforced the Fed's commitment to price stability, confirmed his opposition to forward guidance, and announced several task forces to review key aspects of the Federal Reserve's policy framework. Since taking office, markets have interpreted Warsh's communication as notably hawkish, with over one rate hike priced for this year. Warsh tends to avoid forward guidance, but any commentary on inflation and the recent pullback in oil prices will be eyed. 

• US sold 3-month bills at a high rate of 3.740%, bid-to-cover 2.32x.
• US sold 6-month bills at a high rate of 3.840%, bid-to-cover 2.58x.
• US to sell USD 80bln of 6-week bills on June 30th.

• Fed Pricing: 33bps (prev. Dec +30bps)
• EFFR at 3.63% (prev. 3.63%), volumes at USD 120bln (prev. USD 120bln) on June 26th.
• SOFR at 3.62% (prev. 3.64%), volumes at USD 3.171tln (prev. USD 3.145tln) on June 26th.
• NY Fed RRP operation demand at USD 3.55bln (prev. USD 6.43bln) across 4 counterparties (prev. 8) on June 29th.