TREASURY WRAP: T-NOTE FUTURES (Z6) SETTLE 8 TICKS LOWER AT 105-25+

Yield curve steepens during FOMC press conference amid lack of hawkish surprises and continued reluctance to provide forward guidance. At settlement, 2-year -1.1bps at 4.728%, 3-year +0.6bps at 4.807%, 5-year +2.5bps at 4.871%, 7-year +3.8bps at 4.951%, 10-year +4.6bps at 5.045%, 20-year +4.9bps at 5.408%, 30-year +5.1bps at 5.362%.

THE DAY: The overall reaction to the Fed was a steeper yield curve, with long-end yields rising while front-end yields declined. The move appeared to reflect a lack of hawkish surprises from Fed Chair Warsh during the press conference, while he continued to avoid explicit forward guidance, stressing data dependence but maintaining his strong commitment to price stability. Warsh also added that the Fed does not believe it needs to throw people out of work to achieve its inflation goal. He also provided insight into the meeting structure for next year, with one of the eight scheduled meetings in 2027 set to focus on strategy rather than involve a monetary policy vote. This will increase to two strategy meetings in 2028.

Attention now turns to PCE and GDP on Thursday, which will help further shape Fed rate expectations given the central bank's continued emphasis on incoming economic data.

Ahead of the Fed, yields had been rising, particularly at the front end by c. 3bps, tracking gains in oil prices. Meanwhile, in the UK, Chancellor Healey's budget was largely as expected and resulted in little price action, with fiscal headroom at GBP 15bln, in line with expectations, giving Gilts a slight boost. Oil prices were driven by geopolitics, with Iranian officials denying reports that Qatar had presented a new proposal to end hostilities. Meanwhile, multiple reports suggested Trump could resume attacks on Iran after the midterms. However, Iran FM Araghchi said Iran continues to give diplomacy a chance to succeed and remains in close contact with intermediaries to review ideas.

Note: On the close bell, downside in oil prices and slight upside in T-notes was seen in response to a WSJ report that US VP Vance reacheD out to an Iranian hard-liner in a bid to restart peace talks.

• US to sell USD 44bln of 7-year notes on Thursday 29th October.
• US sold 17-wk bills at a high rate of 4.140%, B/C 3.08x
• US to sell USD 115bln in 4-week bills and USD 110bln in 8-week bills on October 29.

• 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 115bln (prev. USD 109bln) on October 27th
• SOFR at 3.95% (prev. 3.93%), volumes at USD 3.147tln (prev. USD 3.086tln) on October 27th
• NY Fed RRP op demand at 0.23bln (prev. 0.20bln) across 2 counterparties (prev. 1) on October 27th