TREASURY WRAP: T-NOTE FUTURES (U6) SETTLE 3+ TICKS HIGHER AT 108-18

Yield curve flattens but yields remain elevated. At settlement, 2-year -0.7bps at 4.175%, 3-year -0.1bps at 4.254%, 5-year -1.1bps at 4.367%, 7-year -1.4bps at 4.525%, 10-year -1.8bps at 4.708%, 20-year -2.6bps at 5.282%, 30-year -2.4bps at 5.287%. THE DAY: Treasury yields were marginally lower across the curve on Tuesday, with the long end leading the move in a modest bull flattening. However, yields remain elevated, with the 30-year still trading close to 5.300%. There was little obvious catalyst behind the move, with the flattening appearing more reflective of a pause in the pronounced steepening seen over recent sessions. There was no Fed speak, but several data points were digested. On prices, US Import and Export Prices were cooler than expected, adding to the string of softer July inflation reports ahead of the PCE report due later this month. The weekly ADP Employment Change remained low at around 9.5k vs the prior week's 8.25k. On housing, starts declined 12%, below expectations, while the more forward-looking Building Permits rose 5%, topping forecasts. Industrial and Manufacturing Production were broadly in line. In wake of the data, the Atlanta Fed GDPNow estimate for Q3 was revised down to 4.0% from 4.3%. The recent backup in long-end yields has also been weighing on broader market sentiment, particularly after the 30-year rose to its highest level in around 19 years on Monday. The Nasdaq has underperformed, with Technology shares lagging and particular weakness in semiconductors. Higher long-term borrowing costs may be reducing the attractiveness of debt-backed financing for hyperscaler capex, potentially weighing on the outlook for AI infrastructure spending and, in turn, demand for semiconductors. Higher yields also present a valuation headwind for growth stocks more broadly. Fed pricing was little changed again on Tuesday, with markets increasingly responding to tier-one economic data and policy decisions themselves. This week's focus turns to the FOMC Minutes on Wednesday for an indication of how far the hawkish sentiment extended beyond the three dissenters at the July meeting, including whether other officials would have supported a hike. However, Chair Warsh's aversion to forward guidance may limit clues on future decisions, while participants could look through the minutes given the softer NFP and inflation data released since the meeting. SUPPLY Notes/Bonds US to sell USD 16bln of 20-year bonds on August 19th and USD 8bln of 30-year TIPS on August 20th; all to settle August 31st. Bills US to sell USD 92bln of 13-week bills and USD 79bln of 26-week bills on August 17th; all to settle August 20th. STIRS / OPERATIONS Fed Hike Pricing via CME FedWatch: Sept 8.7bps (prev. 9.0bps), Dec 23.6bps (prev. 23.9bps). EFFR at 3.63% (prev. 3.63%), volumes at USD 93bln (prev. USD 99bln) on August 17th. SOFR at 3.66% (prev. 3.62%), volumes at USD 3.068tln (prev. USD 2.957tln) on August 17th. NY Fed RRP op demand at USD 0.45bln (prev. USD 0.725bln) across 1 counterparty (prev. 1) on August 13th. Treasury Buyback [Liquidity support, 20-30year, max USD 2bln]: Accepts USD 2bln of 19.868bln offers, O/C 9.934x. Accepts 3 of 36 eligible issues.