TREASURY WRAP: T-NOTE FUTURES (Z6) SETTLED 2 TICKS HIGHER AT 105-10

Treasury curve flattens as AI debt concerns keep the flight-to-haven trade in play. At settlement, 2-year +0.9bps at 4.787%, 3-year +0.4bps at 4.872%, 5-year -1.1bps at 4.936%, 7-year -2.3bps at 5.021%, 10-year -2.3bps at 5.119%, 20-year -4.9bps at 5.479%, 30-year -5.0bps at 5.426%. THE DAY: The Treasury curve was flatter. Whilst breadth was encouraging in US equities, the lacklustre tech performance reflects continued concern surrounding AI debt and, as such, gives investors further reason to increase exposure to USTs. That said, the short end was sold, leaving front-end yields modestly higher despite the slight decline in oil prices on optimism over a potential US-Iran deal. A clear driver of the 2/3yr upside was lacking, but with markets still favouring a hold at next week's FOMC, repricing may have been at play. Additionally, even if a US-Iran deal were reached imminently, resolving the refined product shortage is not an overnight fix, as repairing refineries and building extra capacity can take months/years. US data included a huge 7.3% decline in Pending Home Sales to the lowest level on record, as higher mortgage rates remain a barrier to a pickup in housing activity; Building Permits were little changed in September, as expected. Today, the Atlanta Fed revised its GDPNow Q3 real GDP growth estimate lower to 3.5% from 3.6%. Supply US sold 6-week bills at a high rate of 3.975%, B/C 2.74x US to sell USD 75bln of 17-week bills on October 21st, and USD 105bln of 8-week bills and USD 110bln of 4-week bills on October 22nd; all to settle on October 27th STIRS / OPERATIONS 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 110bln (prev. USD 115bln) on October 19th SOFR at 3.87% (prev. 3.88%), volumes at USD 2.888tln (prev. USD 2.925tln) on October 19th NY Fed RRP op demand at USD 0.227bln (prev. USD 0.330bln) across 3 counterparties (prev. 7) on October 20th