TREASURY WRAP: T-NOTE FUTURES (U6) SETTLE 3 TICKS HIGHER AT 110-03

T-Notes saw slight gains on Thursday, and moved higher post the US data dump, with the cooler-than-expected PCE M/M for May the highlight. 

THE DAY: Treasuries traded within very tight ranges through the European morning, around a couple of ticks, before rising to intra-day highs following the deluge of US data, with most attention on PCE. Overall, the data was pretty mixed, as Q1 GDP final and personal spending beating estimates; however, it seemed to be brushed aside by the cooler-than-expected headline PCE M/M at 0.4% (exp. 0.5%), which saw some unwinding of the Fed rate hike bets, albeit now little changed D/D come settlement. Looking at the rest of PCE, core PCE M/M was in line, but Y/Y for both metrics was hotter than anticipated, whereby Fed's Goolsbee said core inflation still well too high, and trending wrong way. Goolsbee reiterated that they need to keep watching inflation, and it that side of the mandate that is clearly the problem. Chicago Fed President did add that the PCE report wasn't all negative, and saw a little bit of improvement on services. Goolsbee added it is hard to get throughline on inflation, how persistent or temporary, and that inflation is going the wrong way, some of that driven by one-and-done; inflation a little more disturbing on services side. In the US afternoon, following the data, T-Notes saw two-range trade to print a fresh daily high of 110-09, before coming off those levels into settlement, although still remaining well in the days tight ranges. One of the potential catalysts was the US 7yr (more below), but it garnered little reaction, in what was a pretty average auction.

In supply, the US 7yr note auction was average, as it came in on-the-screws, against the previous 0.1bps stop-through and the six-auction average of a 0.2bps tail. Bid-to-cover was in line with recent averages at 2.50x (prev. 2.52x, avg. 2.49x). In terms of the breakdown, dealers took 12.8% (prev. 10.4%, avg. 10.9%), and alike to the 5yr auction on Wednesday, directs took a chunky 29.7% (prev. 11.2%, avg. 24.3%), and indirects took a much smaller than last time out 57.6% (prev. 78.4%, avg. 64.8%). Note, following the US selling 44bln of 7yr notes, little move was seen in Treasuries. 

SUPPLY:

• US sold USD 44bln of 7yr notes; on-the-screws

Bills:

• US sold 4-wk bills at high-rate 3.610%, B/C 2.74x; sold 8-wk bills at high-rate 3.660%, B/C 2.79x
• US to sell USD 92bln of 13-wk bills and USD 79bln of 26-wk bills on June 29th, to sell USD 80bln of 6-wk bills on June 20th; all to settle on July 2nd

STIRS/OPERATIONS

• Fed Pricing: 33bps of hikes by year-end (prev. Dec 34bps)
• EFFR at 3.63% (prev. 3.63%), volumes at USD 113bln (prev. USD 109bln) on June 24th.
• SOFR at 3.62% (prev. 3.62%), volumes at USD 3.116tln (prev. USD 3.105tln) on June 24th.
• NY Fed RRP op demand at 5.7bln (prev. 4.53bln) across 6 counterparties (prev. 7) on June 25th.