TREASURY WRAP: T-NOTE FUTURES (Z6) SETTLE 21 TICKS HIGHER AT 105-17

Yields continue to decline despite more hot inflation prints. At settlement, 2-year -4.9bps at 4.757%, 3-year -6.9bps at 4.844%, 5-year -9.1bps at 4.903%, 7-year -10.2bps at 4.989%, 10-year -10.1bps at 5.093%, 20-year -9.4bps at 5.482%, 30-year -9.5bps at 5.430%.

THE DAY: The move lower in UST yields continued on Thursday as the tech/AI rout extended into the APAC session overnight, with the KOSPI closing 7.5% lower.

During the US session, attention turned to economic data, with PPI coming in hotter than expected, while Retail Sales and the NY Fed Manufacturing survey also beat forecasts. Meanwhile, Jobless Claims were in line with expectations, while the Philly Fed survey disappointed.

Markets initially focused on the hotter PPI and stronger Retail Sales data, resulting in a brief spike in Treasury yields. However, the dip in T-note futures was swiftly bought as technology stocks remained under pressure, particularly in the Nasdaq, potentially supporting haven demand and helping T-notes climb to fresh session highs. As the technology sector subsequently began to recover, T-notes came under renewed selling pressure, ultimately settling off their session highs.

Despite another hotter-than-expected inflation print, money market pricing for an October Fed rate hike eased from Wednesday's levels, when markets assigned a roughly 50% probability of a 25bps increase. This has since fallen to around 30%, although Oxford Economics continues to expect hikes in both October and December following Thursday's data. Attention now turns to Fed Chair Warsh's remarks at the IMF overnight, with participants looking for his assessment of the latest inflation figures and any signals regarding upcoming policy decisions.

• US Treasury to sell USD 13bln of 20-year bonds on Oct 21st, to settle Oct 22nd; To sell USD 26bln of 5-year TIPS on Oct 22nd, to settle October 30th

• US sells 8-week bills at a high rate of 4.050%, B/C 2.26x; sells 4-week bills at a high rate of 4.000%, B/C 2.56x
• US to sell USD 95bln of 13-week bills and USD 82bln of 26-week bills on Oct 19th.
• US to sell USD 95bln of 6-week bills on Oct 20th

• Fed Hike Pricing via CME FedWatch: Oct 7.3bps (prev. 12.3bps), Dec 28.7bps (prev. 29.8bps)
• EFFR at 3.88% (prev. 3.88%), volumes at USD 111bln (prev. USD 106bln) on October 14th
• SOFR at 3.88% (prev. 3.89%), volumes at USD 2.974tln (prev. USD 3tln) on October 14th
• NY Fed RRP op demand at 1.20bln (prev. 0.20bln) across 4 counterparties (prev. 2) on October 15th
• Treasury Buyback [Liquidity support, 20-30-year, max USD 6bln]: Accepts USD 6.0bln of USD 40.84bln offers; accepts 3 of 42 eligible securities