US TREASURY WRAP: T-NOTE FUTURES (Z6) SETTLE 1+ TICKS LOWER AT 106-03+

Curve flattens as markets await FOMC, big tech earnings, and PCE. At settlement, 2-year +3.2bps at 4.718%, 3-year +2.9bps at 4.782%, 5-year +1.6bps at 4.828%, 7-year +0.6bps at 4.903%, 10-year -0.9bps at 4.990%, 20-year -2.4bps at 5.351%, 30-year -2.4bps at 5.303%

THE DAY: The Treasury curve flattened as 2-, 3- , 5-, and 7yr yields ticked higher while the rest of the curve was flat to lower. US data was absent to start the week, with the Fed and big tech earnings the main catalysts ahead of PCE data on Thursday. A hold is widely expected at the FOMC's Wednesday meeting, shifting the focus onto the vote split and any hawkish lean within the statement or Warsh's press conference to offset the recent easing in financial conditions following the AI debt scare.

Stocks rallied to start the week, as semiconductors and neoclouds began a potential recovery from recent weakness, although long-end yields still shifted lower despite the risk-on backdrop.

In the US afternoon, the 2yr note auction tailed by 0.3bps, again signalling recent weakening demand relative to the six-auction average stop-through of 0.2bps. Dealers' proportion of the bid was little changed at 13.0%, as Directs picked up the slack from weaker Indirect demand.

• US Treasury sold USD 69bln of 2-year notes; tailed by 0.3bps.
• US Treasury announced a preliminary liquidity support buyback of up to USD 6bln in nominal coupon securities with maturities of 20-30 years, scheduled for October 27th, with settlement on October 28th.
• US sold 3-month bills at a high rate of 4.050%, B/C 3.07x; sold 6-month bills at a high rate of 4.210%, B/C 2.63x.

• Fed Hike Pricing via CME FedWatch: Oct 3.2bps (prev. 2.4bps), Dec 22.4bps (prev. 21.8bps)
• EFFR at 3.88% (prev. 3.88%), volumes at USD 109bln (prev. USD 119bln) on October 23rd
• SOFR at 3.92% (prev. 3.90%), volumes at USD 3.065tln (prev. USD 2.945tln) on October 23rd
• NY Fed RRP op demand at USD 0.200bln (prev. USD 0.200bln) across 1 counterparties (prev. 1) on October 26th