TREASURY WRAP: T-NOTE FUTURES (U6) SETTLE 9 + TICKS LOWER AT 109-28+

Yields rise across curve despite lower oil prices as attention turns to jobs data. At settlement, 2-year +3.2bps at 4.139%, 3-year +3.8bps at 4.147%, 5-year +4.7bps at 4.193%, 7-year +5.5bps at 4.306%, 10-year +5.4bps at 4.430%, 20-year +5.7bps at 4.924%, 30-year +5.1bps at 4.916%.

THE DAY: Treasury yields moved higher across the curve on Tuesday despite lower oil prices. There was no clear catalyst for the move, with yields drifting higher throughout the US session as participants remained reluctant to price out the Fed's recent hawkish shift ahead of Thursday's nonfarm payrolls report, which Treasury Secretary Bessent touts to be a strong one.

Economic data was mixed. The JOLTS report was broadly constructive, with job openings little changed from the prior month but above expectations, while both the quits rate and vacancy rate remained unchanged. The data reinforced the view that labour demand remains stable. Consumer confidence improved from the prior month, although by less than expected. Within the report, the share of respondents saying jobs are plentiful was little changed, while the proportion saying jobs are hard to get rose to 22.5% from 19.8%, suggesting perceptions of labour market conditions softened somewhat. Elsewhere, the Chicago PMI declined from the prior month.

Fed commentary came from Hammack, who maintained a hawkish tone. She said the labour market remains around full employment, economic growth continues to look solid and inflation is still too high, adding that the Fed may ultimately need to consider further rate hikes. At the same time, she stressed she would approach upcoming meetings with an open mind and would not prejudge policy decisions, while acknowledging the risks that higher interest rates could pose to the broader economy.

Looking ahead, market attention turns to Chair Warsh's appearance at the ECB's Sintra Forum on Wednesday before focus shifts to Thursday's US nonfarm payrolls report. The employment data will provide another important read on labour market conditions ahead of the July 29th FOMC meeting, where markets continue to expect the Fed to leave policy unchanged. Looking ahead to September, the market assigns an 80% probability of a 25bps hike. Regarding the NFP data, Treasury Secretary Bessent said he expects another strong jobs report, but claims he has not seen the data yet.

SUPPLY

Bills

• US sold 6-week bills at a high rate of 3.655%, B/C 2.71x
• US to sell USD 72bln of 17-week bills (prev. 69bln) on July 1st, USD 85bln of 4-week bills (prev. 70bln) and USD 85bln of 8-week bills (prev. 75bln) on July 2nd; all to settle July 7th

STIRS / OPERATIONS

• Fed Pricing: 35bps (prev. Dec +33bps)
• EFFR at 3.63% (prev. 3.63%), volumes at USD 123bln (prev. USD 120bln) on June 29th
• SOFR at 3.62% (prev. 3.62%), volumes at USD 3.126tln (prev. USD 3.171tln) on June 29th
• NY Fed RRP op demand at USD 26.90bln (prev. 3.55bln) across 10 counterparties (prev. 4) on June 30th