Belly Leads The Way Lower Post-FOMC

T-Notes -0-04 at 131-20 at typing, hovering just above Wednesday's lows. The belly of the cash curve led the post-FOMC decision sell off, with the 5- to 7-Year sector cheapening by ~11bp on the day come the bell.

• As a reminder, the Fed hiked its IOER by 5bp, while it left the broader monetary policy settings unchanged. The SEP revealed that the median dot now looks for 2 hikes in 2023, while 7 of 18 members see a 2022 hike based on the current forecasts. 2 more and that's a split board. Still, Powell stressed that these projections need to be taken with a "big grain of salt," reiterating that any future lift-off will remain "outcome based and not time based." On the prospect of tapering Powell noted that "we are a ways away from substantial further progress, we think. But we are making progress." To another question he added "participants expect continued progress, ahead toward that objective. Assuming that is the case, it will be appropriate to consider announcing a plan for reducing our asset purchases at a future meeting. At coming meetings, the committee will continue to assess the economy's progress toward our goals and will give advance notice before announcing any decision. The timing of course a lot will depend on the pace of that progress, and not on any calendar." Powell's presser noted multiple times that there was a risk that inflation will remain higher than the FOMC projections show (that's something he didn't say last time). All in all it would seem that tapering will be well underway and probably over by the time the FOMC hikes. So it stands to reason that we're in line for a taper timeline at least as quickly as has been expected (late-2021 announcement for late 2021/early 2022 start) barring some real downside shocks in the data.
• On the flow side 15K of FV futures sales via block trades shortly after the Fed's decision was released aided the weakness in the belly. Elsewhere, 20K block buys of the EDU2/U4 & Z2/Z4 spreads were seen post-decision.