TREASURY WRAP: T-NOTE FUTURES (Z6) SETTLE 7+ TICKS HIGHER AT 104-23

T-notes rally as AI concerns weigh on stocks, while Eurozone yields fall following ECB minutes. At settlement, 2-year -1.9bps at 4.751%, 3-year -3.0bps at 4.885%, 5-year -4.1bps at 4.987%, 7-year -5.1bps at 5.105%, 10-year -5.9bps at 5.227%, 20-year -7.0bps at 5.645%, 30-year -7.2bps at 5.601%. THE DAY: T-notes appeared to benefit from haven demand on Thursday, with the curve bull flattening as the long end led the rally. The move coincided with a risk-off session for technology stocks, despite rising oil prices. Tech came under pressure following disappointing preliminary Samsung earnings, which weighed on the memory sector, while the FT reported during US trade that OpenAI's annual revenue was USD 20bln lower than previously estimated, at USD 50bln versus USD 70bln. The report weighed on broader AI-related names, including NVDA, ORCL, AMD and INTC. However, while technology weakness dragged on the major indices, the decline in yields appeared to support the broader equity market, with market breadth remaining positive. Attention was also on the USD 22bln 30-year Treasury auction. The substantial yield pickup from last month's offering may have helped attract demand, although the rally in long-end Treasuries throughout Thursday reduced some of the concession ahead of the auction, with the high yield of 5.618% well below the roughly 5.773% peak seen earlier in the session. Ultimately, the auction was fairly average, with a marginal 0.1bp tail and weaker indirect participation than the previous offering. Nonetheless, the above-average B/C and relatively low dealer allocation suggested the auction was still reasonably well absorbed. US data saw the latest weekly initial jobless claims remain under 200k yet again, bringing the four-week average also below the round number, suggesting an ongoing, low-hire, low-fire labour market. Fed speak saw Governor Waller echo sentiment from Williams and Jefferson that there is flexibility over the pace of hikes and that they do not need to be consecutive, but he did stress that more hikes are likely needed to tame inflation. Musalem also stressed that more hikes are required to bring inflation back to target, noting rates ought to be going up in the next six to nine months. There may also have been some follow-through from European government bonds, with Eurozone yields declining following the ECB minutes. The minutes noted that higher long-end yields, provided the move remains orderly, support the intended monetary policy stance and could influence the future path of policy rates, suggesting that tighter financial conditions may reduce the need for additional ECB hikes. Meanwhile, Eurogroup President Pierrakakis said he was mindful, but not alarmed, by Eurozone bond spreads, adding that adopting a sound 2027 French budget would be key to calming markets. He also called for fiscal prudence. ECB President Lagarde acknowledged recent market moves, noting that the ECB remains attentive to developments and has tools available to counter unwarranted market dynamics. Supply Notes US sold USD 39bln of 30-year bonds; Tail 0.1bps. Bills US sold 8-week bills at high rate of 3.980%, B/C 2.77x; sold 4-week bills at a high rate of 3.980%, B/C 2.40x US to sell USD 82bln 26-week bills, to sell USD 95bln 13-week bills, and to sell USD 95bln 6-week bills on October 13th; all to settle on October 15th STIRS / OPERATIONS Fed Hike Pricing via CME FedWatch: Oct 4.3bps (prev. 4.9bps), Dec 24.1bps (prev. 25.5bps) EFFR at 3.88% (prev. 3.88%), volumes at USD 108bln (prev. USD 120bln) on October 7th SOFR at 3.88% (prev. 3.90%), volumes at USD 2.968tln (prev. USD 2.997tln) on October 7th NY Fed RRP op demand at 0.34bln (prev. 2.34bln) across 2 counterparties (prev. 15) on October 8th US Treasury Buyback [Liquidity Support, 20-30 year, max USD 6bln]: Accepts USD 6bln of USD 14.89bln offers; Accepts 10 of 34 eligible securities