US TREASURY WRAP: T-NOTE FUTURES (Z6) SETTLE 6+ TICKS LOWER AT 105-03+

Yields rose alongside oil on reports suggesting a resumption of a US-Iran conflict may be near. At settlement, 2-year +4.3bps at 4.823%, 3-year +4.2bps at 4.907%, 5-year +4.2bps at 4.969%, 7-year +3.7bps at 5.049%, 10-year +3.1bps at 5.142%, 20-year +1.8bps at 5.491%, 30-year +1.5bps at 5.437%.

THE DAY: Yields climbed across the curve, accelerating ahead of settlement on concerns that strikes between the US and Iran could resume soon. The initial move overnight and into Europe was lower for yields as equity futures were pressured. Thereafter, choppy trade ensued, but with less than 20 minutes to go until settlement, Reuters, citing US officials, reported that the US State Department is preparing to issue an ordered departure of some personnel at US embassies across the Gulf, amid a possible resumption of hostilities, particularly with the Houthis in Yemen. Post-settlement, US State Department issued an ordered departure for non-emergency US Government employees and their family members in Saudi Arabia only, not the whole Gulf. The curve was flatter, a function of the rise in short-end yields outpacing the long end, as near-term inflation expectations remain sticky on the elevated risk of a resumption of the US-Iran conflict.

In other news, US data was quiet, leaving the focus on the US 20-year bond auction. The results indicated another poor, longer-duration auction, highlighted by a 0.9bps tail, although metrics improved from the prior auction, with the tail narrowing from 2.0bps. Dealers' proportion of the bid fell to 10.3% from 16.9%, below the six-auction average of 11.9%. Directs rose to 31.6% from 30.7%, while Indirects rose to 58.2% from 52.5%, though remained below the 62.5% average.

• US sold USD 13bln of 20-year bonds; tails 0.9bps.
• US sold 17-wk bills at high-rate 4.155%, B/C 2.76x.

• Fed Hike Pricing via CME FedWatch: Oct 3.7bps (prev. 4.3bps), Dec 25.3bps (prev. 25.3bps)
• EFFR at 3.88% (prev. 3.88%), volumes at USD 110bln (prev. USD 110bln) on October 20th
• SOFR at 3.88% (prev. 3.87%), volumes at USD 2.925tln (prev. USD 2.888tln) on October 20th
• NY Fed RRP op demand at USD 0.237bln (prev. USD 0.220bln) across 13 counterparties (prev. 1) on October 21st