TREASURY WRAP: T-NOTE FUTURES (Z6) SETTLE 14+ TICKS HIGHER AT 106-20+

Yield curve steepens amid FTQ bid as equities slump following weak tech earnings. At settlement, 2-year -2.7bps at 4.575%, 3-year -2.8bps at 4.649%, 5-year -2.7bps at 4.714%, 7-year -1.5bps at 4.811%, 10-year -1.2bps at 4.925%, 20-year +0.4bps at 5.334%, 30-year +1.2bps at 5.309%.

THE DAY: The yield curve saw further steepening on Friday as front-end yields declined while the long end remained relatively anchored. The decline in front-end yields came despite rising oil prices, with the main market driver being a slew of weak tech earnings weighing on sentiment. Intel tumbled following weak results, disappointing next-quarter guidance and cautious commentary on the PC market, weighing on broader PC names. Meanwhile, SanDisk's earnings pressured the memory sector, while Amazon shares initially slumped following a weak quarter and disappointing FCF, although they managed to claw back much of the losses. AI concerns also mounted after Blackstone reportedly told Anthropic that it may not receive an investment-grade credit rating, according to the FT. These developments helped fuel a FTQ bid in Treasuries, with the Nasdaq on course to enter correction territory.

US data saw the Q3 Employment Cost Index rise 0.8%, in line with forecasts and slightly below the prior 0.9%. Benefits eased to 0.9% from 1.0%, while wages slowed to 0.7% from 0.9%. Little reaction was seen to the report. Meanwhile, Chicago PMI missed expectations, falling to 55.3 from 58.8, below the 56.1 forecast.

Fed speak saw Logan (2026 voter) reiterate that the Fed still needs at least two more 25bps rate hikes, although she acknowledged that adjusting policy gradually can reduce the risk of sharp economic deterioration and that a pause does not change the policy destination. Musalem (2028 voter) said moving sooner reduces the risk of a hit to the broader economy, noting that the Fed will need to raise rates soon but that incremental changes are preferable to abrupt adjustments. Barkin (2027 voter) said the direction of travel for policy is straightforward, but the question is the pace. Daly (2027 voter) said AI matters significantly for how policymakers think about policy in the near and medium term, including the Fed's price stability and employment mandates.

Attention next week turns to the US midterm elections, with betting markets pricing a Democratic sweep at around 70%. The Treasury's Quarterly Refunding Announcement is also due, with particular focus on any guidance updates or adjustments to its buyback programme, before attention shifts to the October NFP report, where expectations currently look for 55k jobs added.

• US to sell USD 95bln of 13-week bills and USD 82bln of 26-week bills on November 2nd, and USD 100bln of 6-week bills on November 3rd; all to settle on November 5th.

• Fed Hike Pricing via CME FedWatch: Dec 17.6bps (prev. 19.9bps), Mar 37.1bps (prev. 43.8bps)
• EFFR at 3.88% (prev. 3.88%), volumes at USD 117bln (prev. USD 116bln) on October 29th
• SOFR at 3.94% (prev. 3.94%), volumes at USD 3.145tln (prev. USD 3.074tln) on October 29th
• NY Fed RRP op demand at 4.38bln (prev. 0.35bln) across 3 counterparties (prev. 4) on October 30th