TREASURY WRAP: T-NOTE FUTURES (U6) SETTLE 7 TICKS LOWER 108-20+

T-notes bear flattened as rising oil prices reinforced expectations for further Fed tightening. At settlement, 2-year +5.0bps at 4.261%, 3-year +4.9bps at 4.300%, 5-year +4.5bps at 4.368%, 7-year +3.7bps at 4.489%, 10-year +3.0bps at 4.624%, 20-year +2.1bps at 5.141%, 30-year +1.3bps at 5.129%.THE DAY: Treasuries sold off across the curve as crude prices extended their recent gains amid continued US-Iran hostilities and further threats from President Trump. Early in the session, there was some optimism after reports Pakistan was attempting to broker a resumption of talks between the US and Iran, while other reports suggested Iran had proposed a 10-day ceasefire and that the US was seeking additional concessions. However, those hopes faded after renewed tensions involving Saudi Arabia and the Houthis. The Houthis warned shipping firms to avoid loading or unloading at Saudi ports, adding that any vessel bound for or departing Saudi ports could become a legitimate target.On the data front, the only notable US release was the ADP Employment Change, which showed 16.5k jobs were added in July, easing from the prior 19.3k and pointing to a fourth consecutive slowdown in hiring. Elsewhere, the Philadelphia Fed Non-Manufacturing Business Outlook Survey improved on the month, although neither release had a meaningful impact on Treasury trading.Instead, markets continued to look through the second-tier data, with price action driven primarily by developments in the Middle East and their implications for energy prices and inflation expectations. Attention now turns to next week's July FOMC decision and the June PCE inflation report, while this week's USD 13bln 20-year bond auction will provide an important test of investor demand as geopolitical uncertainty remains elevated.Higher oil prices continued to lift Fed rate expectations, with money markets now pricing around 30bps of tightening by year-end. A 25bp hike is now fully priced by October, while September carries an implied probability of around 78%. Those repricing dynamics kept the front end under the greatest pressure, resulting in a bear flattening of the Treasury curve.SUPPLYNotesUS to sell USD 13bln of 20yr bonds on July 22nd, to settle on July 24th; to sell USD 21bln of 10-year tips on July 23rd; to settle on July 31stBills US sold 6-week bills at a high rate of 3.650%, B/C 2.79x US to sell USD 110bln in 4-week bills and USD 100bln of 8-week bills on July 23rd; to sell USD 72bln of 17-week bills on July 22nd; all to settle July 28th STIRS / OPERATIONS Fed Pricing: Dec 31.9bps (prev. 27.7bps) EFFR at 3.63% (prev. 3.63%), volumes at USD 106bln (prev. USD 111bln) on July 20th SOFR at 3.57% (prev. 3.59%), volumes at USD 3.012tln (prev. USD 3.03tln) on July 20th NY Fed RRP op demand at 0.275bln (prev. 0.03bln) across 1 counterparties (prev. 6) on July 21st