TREASURY WRAP: T-NOTE FUTURES (U6) SETTLE 5+ TICKS HIGHER AT 110-08+

Treasuries settled with slight gains on Friday, albeit trading within tight parameters amid a lack of tier 1 US data and Fed speak.

THE DAY: Treasuries saw choppy trade to end the week amid a lack of catalysts driving the space. Energy prices and geopolitics had little influence, likewise with Fed's Kashkari, who is seemingly pretty neutral within the Committee. Highlighting this, he sees rates on hold in 2027, and has 1 rate hike pencilled in for 2026, which is the same as the median SEP in the latest FOMC's dot plot; he echoed the known theme re. concerns on inflation, and added he is going to have to see how no forward guidance works. On the data footing, advanced goods trade balance was a deeper deficit than expected, while final UoM for June was mixed; sentiment and expectations were revised up, while conditions was revised lower. 1yr ticked down to 3.3% (exp. & prev. 3.4%), with 5yr unchanged at 4.6%, as forecasted.

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

Next week, US payrolls report will be the headline driver next week, set to be released on Thursday due to the shortened Thanksgiving week.

STIRS/OPERATIONS

• Fed Pricing: 30bps of hikes by year-end (prev. Dec 33bps)
• EFFR at 3.63% (prev. 3.63%), volumes at USD 120bln (prev. USD 113bln) on June 25th.
• SOFR at 3.64% (prev. 3.62%), volumes at USD 3.145tln (prev. USD 3.116tln) on June 25th.
• NY Fed RRP op demand at 6.43bln (prev. 5.7bln) across 8 counterparties (prev. 6) on June 26th.