TREASURY WRAP: T-NOTE FUTURES (U6) SETTLE 7+ TICKS LOWER AT 109-01

T-notes flatten in quiet trade with eyes on geopolitics. At settlement, 2-year +3.4bps at 4.208%, 3-year +3.1bps at 4.244%, 5-year +2.8bps at 4.308%, 7-year +2.2bps at 4.429%, 10-year +1.8bps at 4.567%, 20-year +0.9bps at 5.080%, 30-year +0.9bps at 5.070%.

THE DAY: The Treasury curve flattened on Friday, with front-end yields edging higher while longer-dated yields were little changed. Price action largely tracked a choppy session in the crude complex, with oil ultimately settling lower despite bouts of strength after President Trump said he had told Iran the ceasefire was not over. However, he also reiterated that Iran had reached out to the US and wanted to hold talks.

Elsewhere, trading conditions were relatively quiet with no major US economic data released. Attention now turns to next week's CPI and PPI reports, where headline CPI is expected to ease on the month as it reflects the unwind in energy prices following the US-Iran memorandum of understanding signed in June, although the subsequent breakdown in the ceasefire leaves upside risks to the inflation outlook. Reports had suggested that US-Iran talks would continue next week, but the Iranian press denied the report. 

The Fed's semi-annual Monetary Policy Report reiterated that inflation remains elevated, citing tariffs alongside developments in the Middle East and AI as contributing factors. The report also acknowledged that the labour market remains broadly stable and that longer-term inflation expectations remain well anchored. The report comes ahead of Chair Warsh's testimony to the House on Tuesday and the Senate on Wednesday. Warsh is likely to reiterate his recent emphasis on price stability while continuing to avoid providing explicit forward guidance.

Overall, it was a quiet session for the Treasury market. However, a sizeable 10.6k block trade at 102-317 in September 2026 2-year Treasury note futures crossed the tape at 08:41ET, while Deere (DE) Funding Canada also entered the debt market with a USD-denominated offering.

• US sold 17-wk bills at high-rate 3.790%, B/C 3.41x
• US to sell USD 100bln of 4-week bills (prev. 85bln) and USD 95bln of 8-week bills (prev. 85bln) on July 9th.

• Fed Pricing: Dec 33bps (prev. 33bps)
• EFFR at 3.62% (prev. 3.62%), volumes at USD 126bln (prev. USD 131bln) on July 9th
• SOFR at 3.53% (prev. 3.58%), volumes at USD 3.126tln (prev. USD 3.158tln) on July 9th
• NY Fed RRP op demand at 0.545bln (prev. 5.77bln) across 3 counterparties (prev. 6) on July 10th