US Treasury Market Daily

Research evidence excerpt

US Treasury Market Daily

m their sizeable acceleration in May, to be offset somewhat

from a potential World Cup boost and a rebound in food services employment.

Meanwhile, we expect the unemployment rate held steady at 4.3% (consensus: 4.3%),

though there are risks that the u-rate could creep higher based on leading indicators such

as the Conference Board’s labor differential and NFIB survey (see US Weekly Prospects,

Michael Feroli, 6/26/26).

The release of tomorrow’s employment report will coincide with an early close ahead of

the July 4th holiday, which could leave the Treasury market vulnerable to outsized

volatility amid reduced liquidity. However, we have found previously that in the

instances in which payrolls were released on early close days ahead of July 4th, volatility

has been in line with levels observed on normal payroll Fridays. Meanwhile, when

payrolls Fridays have occured during full-length sessions during the July 4th week,

volatility has been outsized relative to the size of the surprise. This makes sense to the

extent that liquidity is likely healthier on the early close sessions ahead of the holiday,

rather than on orphaned Fridays following the holiday (see US Treasury Market Daily,

7/1/25). Outside of this potential near-term catalyst, we continue to see risks to Treasury

yields as skewed higher over the medium term, and we continue to hold10s/30s

flatteners as a low-beta way to position for higher yields with a relative value

overlay.

3-year roll estimate

Also tomorrow, Treasury will announce mid-month supply at 11am for auction next

week. We expect $58bn new issue 3-year notes unchanged in size from last month,

$39bn reopened 10-year notes, and $22bn reopened 30-year bonds, both unchanged in

size from June’s reopenings.