TREASURY WRAP: T-NOTE FUTURES (U6) SETTLE 4+ TICKS HIGHER AT 109-12

T-notes recovered some of Monday's losses as crude prices continued to slide while indices tumbled. At settlement, 2-year -3.6bps at 4.194%, 3-year -4.0bps at 4.212%, 5-year -2.5bps at 4.264%, 7-year -1.9bps at 4.373%, 10-year -1.6bps at 4.493%, 20-year -0.8bps at 4.957%, 30-year -0.3bps at 4.940%,

THE DAY: Treasury yields moved lower across the curve on Tuesday, reversing some of Monday's increase as crude benchmarks extended their decline following the US-Iran memorandum of understanding. The move lower in yields likely reflected easing inflation concerns as energy prices continued to retreat, while some profit-taking may also have emerged after the sharp Treasury selloff following last week's hawkish FOMC decision. There may have been some flight to quality supporting T-notes amid the downside in US equities, led by tech weakness. 

Economic data was mixed. The weekly ADP employment change rose to 30.75k from 26.5k, while the S&P Global Flash PMI data was generally stronger than expected. Manufacturing rose to 55.7 from 55.1, above the 54.7 forecast, while Services increased to 51.3 from 50.7, also exceeding expectations. Elsewhere, the Philadelphia Fed Non-Manufacturing Business Outlook Survey and Richmond Fed Manufacturing Index both missed forecasts.

Fed commentary was limited. Goolsbee reiterated that inflation remains well above target and moving in the wrong direction, adding that he needs to see evidence that current inflation pressures are temporary. He described services inflation as somewhat concerning, while noting that the labour market remains stable and that the economy has not experienced a stagflationary shock. The comments reinforced the message from last week's FOMC meeting that inflation remains a key concern for policymakers.

Elsewhere, reports highlighted strong demand for SpaceX's (SPCX) bond offering. The company reportedly attracted close to USD 90bln of orders for its 5-, 7-, 10-, 20- and 30-year issuance, allowing it to increase the size of the deal from an initially proposed USD 20bln to USD 25bln. Meanwhile, the USD 69bln 2-year note auction was met with strong demand following the recent rise in front-end Treasury yields after the hawkish FOMC decision. The auction stopped through by 0.3bps, marking the first stop-through since January 2026. Despite the strong result, the auction generated little immediate reaction in Treasury futures.

SUPPLY

Notes

• US sold USD 69bln of 2-year notes; Stop through 0.3bps
• US to sell  USD 70bln of 5-year notes on June 24th and USD 44bln of 7-year notes on June 25th; all to settle June 30th (as expected)US to sell USD 28bln 2year FRN on June 24th; to settle June 26th

Bills

• US to sell USD 70bln of 4-week bills and USD 75bln of 8-week bills on June 25th; to sell USD 69bln of 17-week bills on June 24th; to settle June 30th
• US sold 6-wk bills at high-rate 3.620%, B/C 2.91x

STIRS/OPERATIONS

• Fed Pricing: 37bps (prev. Dec 41bps)
• EFFR at 3.63% (prev. 3.63%), volumes at USD 115bln (prev. USD 115bln) on June 22nd
• SOFR at 3.61% (prev. 3.62%), volumes at USD 3.073tln (prev. USD 3.148tln) on June 22nd
• NY Fed RRP op demand at 6.48bln (prev. 3.92bln) across 10 counterparties (prev. 4) on June 23rd