TREASURY WRAP: T-NOTE FUTURES (U6) SETTLE 20 TICKS HIGHER AT 110-00

T-Notes saw strength, extending on Tuesday's strength, as crude prices continue to slide, and as equities dipped to see haven demand flows and flight to quality. 

THE DAY: Treasuries extended higher throughout the duration of the US session, as they were aided by tumbling oil prices and haven demand, given the continued selling we have seen in indices this week, particularly in tech, which started overnight in the APAC session. The next macro catalyst for this is likely to be Micron earnings after-hours, which will give the next guide for the AI/tech space. Highlighting the size of the move, T-Notes saw a low of 109-09+, before settling around highs of 110-00+, in which there was no clear headline catalyst, just broader sentiment.

Economic data and Fed speak were more or less non-existent, as a weak new home sales print failed to move the needle.

Ahead of pension fund quarter-end rebalancing for June, BofA said it is expected to drive material outflows from equities into fixed income. Adds as the S&P 500's quarterly gain of c. 14.8% outperformed 10yr+ Treasuries (around 0.4%) and corporates (around 1.0%), despite a marginal month-to-date tilt favouring equities.

In supply, the US 5yr note auction was weaker than usual, highlighted by the 0.7bps tail, against the previous 0.1bps tail and the six-auction average of a 0.5bps tail. Bid-to-cover was in line with recent averages at 2.35x (prev. 2.34x, avg. 2.33x). In terms of the breakdown, dealers took 12.9% (prev. 12.8%, avg. 12.3%), directs took a chunky 25.5% (prev. 12.3%, avg. 22.4), and indirects took a much smaller than last time out 61.6% (prev. 74.9%, avg. 65.3%). Note, following the US selling 70bln of 5yr notes, little move was seen in Treasuries. In addition, the US sold USD 28bln of 2YR FRNs with the high discount margin dropping to 0.079% from 0.089%

SUPPLY

• US sold USD 70bln of 5yr notes; tails 0.7bps
• US sold USD 28bln of 2-year FRN; High Discount Margin 0.079%

Bills

• US sold 17-week bills at a high rate of 3.770%, B/C 2.55x

STIRS/OPERATIONS

• Fed Pricing: 34bps of hikes by year-end (prev. Dec 37bps)
• EFFR at 3.63% (prev. 3.63%), volumes at USD 109bln (prev. USD 115bln) on June 23rd
• SOFR at 3.62% (prev. 3.61%), volumes at USD 3.105tln (prev. USD 3.073tln) on June 23rd
• NY Fed RRP op demand at 4.53bln (prev. 6.48bln) across 7 counterparties (prev. 10) on June 24th.