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A Touch Richer, FOMC In View

US TSYS

TYH3 deals at 114-29+, +0-04+, at the top of its 0-07 range on a light volume of ~60K, firming into London hours, with activity inhibited by the proximity to today’s FOMC decision.

  • Cash Tsys are 2-3bp richer across the major benchmarks, with the wings leading the bid. Note that the major yield benchmarks haven’t got anywhere near touching their post-CPI lows.
  • With little in the way of headline drivers, the lingering impulse from Tuesday's softer-than-expected CPI data was observed in Asia (after a pullback from best levels into the NY close, which was aided by a soft 30-Year auction and notable block sale in TY futures).
  • A block buy in TY futures (+1,896) helped underpin the space overnight.
  • OIS pricing for the impending Fed meeting is stable, with a 50bp hike fully priced in after previous guidance from the Fed re: a potential step down in the pace of tightening at the meeting. Meanwhile terminal rate pricing sits at ~4.85%, after easing post-CPI.
  • The space looked through reports suggesting that the Biden administration is to put Chinese chipmaker YMTC and more than 30 other companies on a trade blacklist.
  • The FOMC decision and Fed Chair Powell's press conference will dominate today, see our full preview of that event here.
  • Elsewhere UK CPI data may provide some cross-market spillover in the London morning.

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