US TREASURY WRAP: T-NOTE FUTURES (Z6) SETTLE 8 TICKS LOWER AT 106-05

Yield tracked oil prices higher on bets of renewed US-Iran strikes. At settlement, 2-year +3.6bps at 4.684%, 3-year +2.8bps at 4.750%, 5-year +3.0bps at 4.807%, 7-year +2.9bps at 4.888%, 10-year +2.9bps at 4.990%, 20-year +3.9bps at 5.364%, 30-year +3.0bps at 5.316%. THE DAY: Yields were higher across the curve in response to upside inflation risks, with Brent briefly surpassing USD 117/bbl and eyeing the March highs. Higher energy prices come amid an increasing consensus that the US-Iran conflict will return to direct strikes, a matter of when, not if. US President Trump maintains ambiguity over his plans for Iran: "do we want to finish it or let it within is the question", and said "we could take all of the oil in Iran". Separately, the modest rebound in tech stocks, a rotation back into AI names, was another factor behind higher yields, although breadth was poor across equities given the risk higher rates pose to cyclical names. US data had little bearing on price action. S&P Global Flash PMIs were mixed: Services declined more than expected, offsetting an unexpected slight uptick in Manufacturing, resulting in the composite declining M/M. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted that the data shows the economy booming, with output pointing to 5% annualised GDP growth after 4% signalled in Q3. He added that rising oil prices and supply bottlenecks have driven the sharpest selling-price rise in four years, signalling higher inflation ahead. UoM consumer sentiment was essentially flat this month. Year-ahead inflation expectations rose to 4.7% and long-run expectations to 3.5%, both up for a second straight month to their highest since May. Purchasing power is the dominant worry: buying conditions for durables fell 18% on higher interest rates and affordability concerns. STIRs/OPERATIONS Fed Hike Pricing via CME FedWatch: Oct 2.4bps (prev. 1.8bps), Dec 21.8bps (prev. 20.3bps) EFFR at 3.88% (prev. 3.88%), volumes at USD 119bln (prev. USD 110bln) on October 22nd SOFR at 3.90% (prev. 3.88%), volumes at USD 2.945tln (prev. USD 2.942tln) on October 22nd NY Fed RRP op demand at USD 0.200bln (prev. USD 0.351bln) across 1 counterparties (prev. 2) on October 23rd