TREASURY WRAP: T-NOTE FUTURES (U6) SETTLE 5 TICKS LOWER AT 109-16+

T-noted bid despite oil slump as eyes turn to FOMC next week. 

THE DAY: Treasuries were marginally lower across the curve on Friday, with yields edging higher despite weakness in crude prices as markets continued to digest developments surrounding a potential US-Iran agreement.

It appears a deal is at least in its final stages and could be signed in the coming days. Pakistan's Prime Minister stated that an agreement has been reached between the US and Iran and that both sides are now working to finalise the next steps. Energy markets remained choppy throughout the session, however, as US and Iranian media circulated differing accounts of the proposed deal. A reported 14-point Iranian proposal was pushed back on by US officials, while US media separately reported a five-point framework. Despite the conflicting reports, both President Trump and Iran's Foreign Minister urged participants to ignore speculation and await official announcements, potentially suggesting negotiations remain constructive.

Elsewhere, the University of Michigan consumer sentiment survey was the key economic release. The preliminary June headline rose above expectations, supported by improvements in both current conditions and consumer expectations. Inflation expectations also eased, with the 1-year measure falling to 4.6% from 4.8% and the 5-year measure declining to 3.4% from 3.9%. The data generated little market reaction, although a successful US-Iran agreement and further declines in energy prices could support additional improvements in sentiment and inflation expectations in the months ahead.

Attention now turns to next week's FOMC decision. Rates are widely expected to remain unchanged, but focus will centre on whether the Committee removes its easing bias from the statement. Markets will also closely watch Chair Warsh's press conference for further insight into his views and how policymakers are balancing resilient labour market conditions against inflation that remains above target.

SUPPLY

Notes

• US Treasury to sell USD 13bln of 20-year bonds on June 16th, to settle June 22nd; to sell USD 24bln of 5-year TIPS on June 18th, to settle June 30th

Bills

• US to sell USD 89bln of 13-week bills, and USD 77bln of 26-week bills on June 15th, to settle on June 18th
• US to sell USD 65bln of 6-week bills on June 16th, to settle on June 18th

STIRS/OPERATIONS

• Fed Pricing: 24bps (prev. Dec 18.5bps)
• EFFR at 3.62% (prev. 3.62%), volumes at USD 106bln (prev. USD 106bln) on June 11th
• SOFR at 3.60% (prev. 3.59%), volumes at USD 3.061tln (prev. USD 3.023tln) on June 11th
• NY Fed RRP op demand at USD 0.454bln (prev. 0.460) across 6 counterparties (prev. 3)