TREASURY WRAP: T-NOTE FUTURES (U6) SETTLES 4 TICKS LOWER AT 108-14+

Yield curve steepens in quiet trade as attention turns to FOMC Minutes. At settlement, 2-year +1.3bps at 4.184%, 3-year +0.8bps at 4.255%, 5-year +1.6bps at 4.378%, 7-year +2.1bps at 4.537%, 10-year +3.2bps at 4.724%, 20-year +5.0bps at 5.307%, 30-year +5.0bps at 5.311%.

THE DAY: The Treasury curve steepened on Monday in relatively quiet trade, with the move led by the long end. The 30-year yield broke above 5.300%, moving above the peaks seen following the July FOMC, when Chair Warsh's avoidance of forward guidance and apparent comfort with tighter financial conditions helping the Fed achieve its goals triggered a pronounced steepening of the curve.

The highlight this week will be the FOMC Minutes on Wednesday, where attention will be on whether the preference for tighter policy extended beyond the three dissenters and whether other participants saw a case for a July hike. However, markets may ultimately look through the minutes given their backward-looking nature, particularly as they will not capture the subsequent softer inflation and employment data that have seen participants pare Fed rate hike expectations.

Oil prices settled higher amid mixed geopolitical messaging. President Trump told Fox that the US is in contact with the IRGC through back channels, although Iran subsequently pushed back on the claim. Reports also suggested that a 60-day extension of the US-Iran ceasefire has been reached, although at the time of writing there has been no confirmation from either the US or Iran. Meanwhile, Trump threatened military action against Oman if it obstructs efforts to reopen the Strait of Hormuz.

• US to sell USD 16bln of 20-year bonds on August 19th and USD 8bln of 30-year TIPS on August 20th; all to settle August 31st Bills
• US to sell USD 95bln of 6-week bills on August 18th on August 18th, USD 92bln of 13-week bills and USD 79bln of 26-week bills on August 17th; all to settle August 20th.

• Fed Hike Pricing via CME Fed Watch: Sept 8.2bps (prev. 8.2bps), Dec 22.1bps (prev 24.2bps).
• EFFR at 3.63% (prev. 3.63%), volumes at USD 99bln (prev. USD 106bln) on August 14th
• SOFR at 3.62% (prev. 3.62%), volumes at USD 2.957tln (prev. USD 2.932tln) on August 14th
• NY Fed RRP op demand at 0.45bln (prev. 0.725bln) across 1 counterparties (prev. 1) on August 13th

Long-end-led steepening into a major event risk is a familiar pattern: sessions ahead of FOMC Minutes have historically seen the back of the curve carry the move when the perceived risk is hawkish, since the belly and front end are anchored by near-term policy pricing while the 20/30-year sector expresses term premium and supply concerns. The wrap itself frames the question well, namely whether the Minutes reveal a hawkish preference extending beyond known dissenters, though the customary caveat applies that minutes are stale by publication and routinely get faded when intervening data has shifted the rate path, as softer inflation and employment prints appear to have done here. The supply calendar is a live transmission channel for this kind of move: 20-year bond and 30-year TIPS auctions into a steepening long end have tended to demand concession, and weak tails at the long end have on past occasions extended the steepener rather than capped it. The energy leg matters through the breakeven channel, with crude higher on Strait of Hormuz and Iran headlines feeding the inflation-compensation component of long yields independently of the policy debate. Watchpoints are the Minutes' breadth of hawkishness, the long-end auction tails, and whether the front end stays pinned, since a steepener that survives the minutes without front-end participation is the term-premium variant rather than a policy repricing.