TREASURY WRAP: T-NOTE FUTURES (Z6) SETTLE 6+ TICKS LOWER AT 105-08

AI equity rebound gives space for US yields to rally. At settlement, 2-year +4.8bps at 4.763%, 3-year +4.8bps at 4.855%, 5-year +5.6bps at 4.933%, 7-year +6.0bps at 5.034%, 10-year +5.9bps at 5.140%, 20-year +5.4bps at 5.528%, 30-year +5.4bps at 5.480%.

THE DAY: Yields rose as the easing of AI concerns over the weekend prompted a return of the Treasury sell-off, alongside upside in equities. A lack of further negative AI news meant the weekend acted as a clearing event, although continued positive sell-side commentary on CoreWeave after its sharp sell-off last week was not enough to prevent shares trading lower once again. 

Other upside factors included the rise in prompt crude futures following unconfirmed Houthi attacks on Saudi Arabia's oil facilities. Across the Atlantic, turmoil in France continued, with weekend protests turning into riots, absent of a clear immediate solution, leaving growing uncertainty over how long the standoff between the government and protesters will last. Concern grows over the impact on growth and business/consumer confidence. ZN Z6 hit lows of 105-04 before bouncing to 105-08 as oil prices retreated into settlement. 

US data saw the NAHB Housing Market Index fall to 29 from 32, the lowest reading since June 2012, weighed on by declines in current sales conditions, sales expectations and prospective buyer traffic.  

• US sold 3-month bills at a high rate of 4.095%, B/X 2.77x; sold 6-month bills at a high rate of 4.220%, B/C 2.84x

• Fed Hike Pricing via CME FedWatch: Oct 4.3bps (prev. 4.3bps), Dec 25.8bps (prev. 26.0bps)
• EFFR at 3.88% (prev. 3.88%), volumes at USD 115bln (prev. USD 118bln) on October 16th
• SOFR at 3.89% (prev. 3.89%), volumes at USD 2.925tln (prev. USD 3.025tln) on October 16th
• NY Fed RRP op demand at 0.330bln (prev. 0.100bln) across 7 counterparties (prev. 1) on October 19th