TREASURY WRAP: T-NOTE FUTURES (Z6) SETTLE 14+ TICKS HIGHER AT 104-21+

A choppy session for Treasuries amid mixed data, Fed speak and geopolitics as we enter Q4. At settlement, 2-year -10.6bps at 4.787%, 3-year -9.6bps at 4.904%, 5-year -7.9bps at 5.009%, 7-year -6.7bps at 5.124%, 10-year -5.0bps at 5.239%, 20-year -2.7bps at 5.648%, 30-year -2.5bps at 5.606%. THE DAY: Treasuries were pressured in the morning and hit lows during the European session, perhaps partly on reports that Chinese refiners have suspended fuel-product exports beyond Hong Kong and Macau, adding to concerns around global diesel supplies, particularly with the US considering measures to keep more diesel within the country. T-notes then gradually pared losses around US economic data, where initial jobless claims remained below 200k, and continuing claims fell further. The Revelio Labs labour market report beat expectations, while the final Chicago Fed unemployment rate forecast was unchanged at 4.1%. Attention then turned to ISM Manufacturing PMI, which slipped slightly to 54.5 from 54.6, missing the 55.0 forecast. However, prices jumped to 77.9 from 72.3, while employment improved to 52.7 from 51.2. The strong prices and labour components prompted a brief hawkish reaction, with T-notes coming under modest pressure across the curve. The move was short-lived, however, with T-notes rallying throughout the US afternoon and the curve ultimately bull steepening, as front-end yields fell around 10bps while the 30-year yield declined just 2.5bps. There was no clear catalyst for the move, although positioning may have played a role on the first day of Q4, with yields unwinding some of the sharp rise seen throughout Q3. There may also have been an element of haven demand, with the Franc surging in FX markets while the Euro tumbled. Concerns around diesel supplies remained in focus following the aforementioned reports on Chinese refined-product exports, while the US is reportedly pushing Europe to release diesel stockpiles. However, the extent to which this drove the broader cross-asset moves was unclear. T-notes then took another leg higher to session peaks as Fed Vice Chair Jefferson echoed a similar argument to FOMC Vice Chair Williams that the Fed may take more time before deciding its next rate move, further dampening expectations for an October hike. Money markets now assign just a 24% probability of a 25bps hike in October, versus nearly 70% last week. Supply Notes US to sell USD 39bln 10yr notes on October 7th; to sell USD 58bln 3yr notes on October 6th; to sell USD 22bln 30 year bonds on October 8th; all to settle on October 15th Bills US sold 4-week bills at a high rate of 3.890%, B/C 2.83x; sold 8-week bills at 3.990%, B/C 2.70x US to sell USD 95bln 13-week bills and USD 82bln 26-week bills on October 5th; to sell USD 95bln of 6-week bills on October 6th; all to settle on October 8th STIRS / OPERATIONS Fed Hike Pricing via CME FedWatch: Oct 6bps (prev. 9.8bps), Dec 24.8bps (prev. 30.6bps) EFFR at 3.88% (prev. 3.88%), volumes at USD 83bln (prev. USD 111bln) on September 30th SOFR at 3.90% (prev. 3.88%), volumes at USD 3.23tln (prev. USD 2.967tln) on September 30th NNY Fed RRP op demand at 0.35bln (prev. 11.54bln) across 1 counterparty (prev. 18) on October 1st Treasury Buyback [10-20year, liquidity support, max USD 6bln]: Accepts USD 6bln of 46.39bln offers, accepting 2 of 41 eligible securities. Offer to cover: 7.73x.