TREASURY WRAP: T-NOTE FUTURES (Z6) SETTLE 2 TICKS LOWER AT 106-01+

Curve flattens after strong US economic data, fresh corporate issuance as eyes turn to FOMC. At settlement, 2-year +1.7bps at 4.737%, 3-year +1.7bps at 4.797%, 5-year +1.3bps at 4.839%, 7-year +0.8bps at 4.908%, 10-year +0.3bps at 4.991%, 20-year -0.2bps at 5.351%, 30-year -0.2bps at 5.303%.

THE DAY: Treasury yields were mixed but little changed overall on Tuesday, with attention turning to Wednesday's FOMC rate decision, where markets and analysts expect rates to be left on hold, with a hike largely expected in December.

The yield curve saw a mild flattening, with front-end yields up around 2bps while the long end was little changed. Yields briefly moved higher following stronger-than-expected durable goods data. Housing data was also strong, while consumer confidence notably exceeded expectations.

Aside from the data, corporate issuance was in focus again. Around seven companies were considering fresh issuance in the US investment-grade bond market on Tuesday, according to a Bloomberg survey, after 19 hit the market on Monday, selling over USD 17bln in new debt.

The 5-year auction was solid, posting a narrower tail, improved bid-to-cover, lower Dealer takedown, broadly unchanged Direct demand and an improvement in Indirect demand, albeit the latter remained below recent averages.

• US sold USD 70bln of 5-year notes; tailed by 0.4bps
• US to sell USD 44bln of 7-year notes on Thursday 29th October.
• US sold 6-wk bills at a high rate of 3.950%, B/C 2.83x; sold 1-yr bills at a high rate of 4.290%, B/C 3.15x
• US to sell USD 75bln in 17-week bills on October 28, USD 115bln in 4-week bills and USD 110bln in 8-week bills on October 29, with all three auctions settling on November 3rd

• Fed Hike Pricing via CME FedWatch: Oct 2.4bps (prev. 2.8bps), Dec 22.6bps (prev. 22.6bps)
• EFFR at 3.88% (prev. 3.88%), volumes at USD 109bln (prev. USD 109bln) on October 26th
• SOFR at 3.93% (prev. 3.92%), volumes at USD 3.086tln (prev. USD 3.065tln) on October 26th
• NY Fed RRP op demand at 0.23bln (prev. 0.20bln) across 2 counterparties (prev. 1) on October 27th
• Treasury Buyback [Liquidity Support, 20-30 year, max USD 6bln]: Accepts USD 6bln of 10.75bln offers, accepts 6 of 35 eligible issues.