TREASURY WRAP: T-NOTE FUTURES (U6) SETTLE 7 TICKS LOWER AT 109-19+
T-notes bear flattened on Monday as crude prices rallied, although yields came off session highs after President Trump announced an Israel-Hezbollah ceasefire. At settlement, 2-year +4.9bps at 4.051%, 3-year +4.8bps at 4.097%, 5-year +4.7bps at 4.186%, 7-year +4.4bps at 4.324%, 10-year +4.0bps at 4.477%, 20-year +2.5bps at 4.992%, 30-year +1.9bps at 4.993%.
THE DAY: T-notes continued to track swings in crude amid volatile trade. Treasuries hit session lows during the US morning as crude rallied to peaks after Tasnim reported that Iran had halted message exchanges with negotiators due to Israeli actions in Lebanon and Gaza. Iran also warned it would fully shut both the Strait of Hormuz and the Bab al-Mandab Strait.
However, Treasuries recovered from lows after President Trump posted that he had spoken with both Israel and Hezbollah, with both sides agreeing to cease hostilities. The headline saw crude pare a portion of its earlier gains, although oil still settled firmly higher, leaving the curve bear flatter into settlement.
T-notes saw only a modest reaction to the stronger-than-expected ISM Manufacturing PMI, which was accompanied by firmer employment and easing price pressures.
Attention remains firmly on geopolitics and crude price swings, while focus also turns to Friday’s May nonfarm payrolls report.
STIRS/OPERATIONS
- Fed Pricing: Dec 17.9bps
- EFFR at 3.62% (prev. 3.62%), volumes at USD 109bln (prev. USD 106bln) on May 29th
- SOFR at 3.63% (prev. 3.62%), volumes at USD 3.201tln (prev. USD 3.139tln) on May 29th
- NY Fed RRP op demand at 1.30bln (prev. 11.68bln) across 5 counterparties (prev. 11) on June 1st