TREASURY WRAP: T-NOTE FUTURES (U6) SETTLE 1 TICK LOWER AT 108-25; FUTURES TUMBLED POST SETTLEMENT TO 108-09

T-notes saw a pronounced steepening following the FOMC. 2-year -4.5bps at 4.236%, 3-year -1.3bps at 4.296%, 5-year +2.1bps at 4.387%, 7-year +5.0bps at 4.525%, 10-year +6.1bps at 4.667%, 20-year +10.3bps at 5.214%, 30-year +10.9bps at 5.201%.THE DAY: Treasury yields edged higher ahead of the FOMC, tracking the rebound in oil prices after Iran resumed strikes overnight, prompting retaliatory action from the US and Saudi Arabia. President Trump vowed to hit Iran hard following the attacks on US bases in Jordan, while Israeli media reported the US is preparing for a significantly larger military response than previously seen.However, attention was firmly on the FOMC. The Fed left rates unchanged, as expected, although the decision saw three dissenters—Logan, Hammack and Kashkari—who all preferred a 25bps rate hike. The statement itself generated a dovish market reaction, with front-end Treasury yields initially falling as participants unwound hawkish positioning built ahead of the meeting, with money markets having priced around a 33% probability of a hike.Attention then shifted to Chair Warsh's press conference, which ultimately triggered a pronounced steepening of the Treasury curve, lead by the long-end. While front-end yields remained lower on the session, longer-dated maturities sold off sharply, with the 30-year yield briefly rising above 5.20%, its highest level since 2007. Warsh again refrained from offering any forward guidance, instead emphasising that markets should react to incoming data rather than Fed communication. The continued absence of guidance may be encouraging investors to demand additional term premium further out the curve, reflecting greater uncertainty over the future policy path.Attention on Thursday turns to the US GDP and PCE reports, which will provide the next key test of the inflation outlook following the Fed's decision. However, Warsh stressed today he looks at a range of indicators for reaching 2% inflation. SUPPLYBills 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: 20.6bps (prev. Dec 33.5bps) EFFR at 3.63% (prev. 3.63%), volumes at USD 106bln (prev. USD 104bln) on July 28th SOFR at 3.65% (prev. 3.64%), volumes at USD 2.977tln (prev. USD 2.953tln) on July 28th NY Fed RRP op demand at 2.58bln (prev. 1.13bln) across 5 counterparties (prev. 3) on July 29th