Beige Book: over all econ activity increased at a slight to modest pace in 10 of 12 districts
Geopol: German, France and UK developing plan to engage Russia in peace talks with Ukraine
(IR) Iran suggests 4-stage outline for deal with US; Talks still ongoing, with no final decisions made; Will not enter any agreement that ignores Lebanon - Iranian press (FARS) via Telegram - TTN
Data: Mixed Bag
S&P Services PMI miss
ISM Services beat, Prices Paid lower, New Orders Beat, Employment lower
Factory Orders beat
ES trying to rebound after being offered after open and into S&P Services PMI. USTs: ZNU6 trading near Monday equities open 109'145. 2s10s holding close to 41 bps.
Federal Reserve Bank of Cleveland President Beth Hammack stated that the U.S. central bank may need to act soon to combat inflation pressures that are already too high and on a worrisome trend.
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USTs: 5s strong on the curve, first FYT (3xZF:2xZN) steepening since May 19th, 5s richer by almost 3 bps on 2s5s30s. ZFU6 approaches a congestion area between 107'08-107'16, balance of trend could hinge on this tight range. Breaking 4.08 in cash yield could extend a bull move. 2yy cutting into the selloff from CPI/PPI on the 12th and 13th.
UST Sec Bessent speaking now.
On Iran, POTUS is not going to take a bad deal.
On Iran sanctions relief, "Nothing will be on the table until the Strait is opened and they turn over enriched Uranium. I predict things will go very slowly in terms of that."
On Digital Currency, "This administration has been clear, there will be no Central Bank digital currency." On digital assets "It's the wild west and it's all offshore," wants to see legislation to bring onshore.
UST 7yr Note Auction Resutls
4.29
0.1 bps through
BtC 2.52
Indirects 78.1% (best since December 2024)
Dealers 10.4% (lowest since July 2025)
ZNU6 -1/32nds since 1pm mark, but was bid up in the lead up to the auction.
BBG Intelligence on Fed's Balance-Sheet and WAM: Balance-sheet composition and duration are more likely to shift as Kevin Warsh takes the chairmanship of the Federal Reserve, though we think Treasury-market risks are low should changes be slow-moving and passive. The Fed's current Treasury reinvestment approach could be the first change, encouraging a faster maturity-shortening while remaining a passive process with minimal market impact. We don't see the Fed conducting active asset sales, but a more aggressive pivot remains a bear-steepening risk for Treasuries.
-- Will Hoffman
PCE Core MoM 0.2 vs 0.3, YoY 3.3 vs 3.3. Real Consumer Spending Q/Q 2nd Est 1.4 vs 1.6.
ZFU6 +4/32nds since 8:30 ET data release
Fed's Williams (voter/dove) 8:55 ET
New Home Sales at 10:00 ET
$70B US Treasury 5-Year Note Auction 1pm ET
Last 6 Averages:
Bid-to-Cover 2.34
Indirect Bidders 63%
(April: 2.33 & 72.3%)
In April Customer bid was strong, with Indirect Bidders taking their highest allocation since May 2025, lead by Investment Funds (Hedge Funds and Asset Managers).