TREASURY WRAP: T-NOTE FUTURES (U6) SETTLE 7+ TICKS HIGHER AT 108-26

T-notes rose across the curve as oil prices extended Monday's losses amid further signs of de-escalation between the US and Iran. At settlement, 2-year -4.7bps at 4.273%, 3-year -5.3bps at 4.300%, 5-year -4.6bps at 4.356%, 7-year -4.5bps at 4.468%, 10-year -4.7bps at 4.600%, 20-year -4.7bps at 5.111%, 30-year -4.1bps at 5.093%.THE DAY: Treasury yields moved lower across the curve on Tuesday as oil prices came under further pressure amid additional signs of de-escalation in the Middle East. Reports citing The Times of Israel, via Fox, stated that mediators believe the US and Iran are close to reaching a deal that would resurrect the previously failed memorandum of understanding. Separately, reports suggested Oman has proposed creating a regional group comprising Iran and the Gulf states to oversee ship traffic through the Strait of Hormuz and help provide security for vessels transiting the waterway, while further reports indicated Iran is demonstrating flexibility regarding operations through the Strait. The prospect of a diplomatic resolution saw WTI and Brent crude extend Monday's sharp declines, easing inflation concerns and supporting Treasuries ahead of Wednesday's FOMC decision.US economic data had little impact on price action. Consumer confidence fell by more than expected, driven by a decline in the Present Situation Index, while consumers also became more pessimistic about the six-month outlook. Labour market perceptions softened modestly, with the share of respondents saying jobs were plentiful declining, while those saying jobs were hard to get was little changed. Elsewhere, the Richmond Fed Manufacturing Index disappointed expectations, although the Dallas Fed Manufacturing Index improved from the prior month. The Advance Goods trade deficit was little changed in June, while wholesale inventories beat and retail inventories missed. Treasury supply also had little impact, with the USD 44bln 7-year note auction producing a broadly average result. The auction tailed by 0.2bps, while the bid-to-cover ratio was broadly in line with recent averages. A sharp decline in direct demand was offset by a notable rebound in indirect participation, leaving the overall result broadly balanced.Attention now turns to Wednesday's FOMC decision, before US GDP and PCE data on Thursday, with markets continuing to monitor developments in the Middle East following the recent improvement in diplomatic rhetoric.SUPPLYNotesUS sold USD 44bln of 7-year notes; tail 0.2bpsBills US sold 6-wk bills at high-rate 3.700%, B/C 2.93x US to sell USD 72bln of 17-week bills on July 29th, to sell USD 110bln of 4-week bills and USD 100bln of 8-week bills on July 30th; all to settle August 4th. STIRS / OPERATIONS Fed Pricing: 33.5bps (prev. Dec 36.3bps) EFFR at 3.63% (prev. 3.63%), volumes at USD 104bln (prev. USD 106bln) on July 27th SOFR at 3.64% (prev. 3.64%), volumes at USD 2.953tln (prev. USD 2.979tln) on July 27th NY Fed RRP op demand at 1.13bln (prev. 1.38bln) across 3 counterparties (prev. 3) on July 28th Treasury Buyback [Liquidity support, 20-30year, max USD 2bln]: Accepts USD 2bln of 21.935bln offered, accepts 3 of 35 eligible securities. Offer to cover 10.97x