Block Flow Dominates In Asia Ahead Of FOMC

A lack of tier 1 headline flow made for a relatively limited round of pre-FOMC Asia-Pac trade, at least range-wise, with block flow in the Tsy options space catching the eye. T-Notes held to a narrow 0-04+ range overnight, last -0-02+ at 131-28. Cash Tsy trade has seen some modest twist flattening of the curve. FVJ1 124.25 calls saw 12K lifted across 3 blocks, the TYJ1 130.00 puts saw a 3,750 block buyer and the TYJ1 131.00 puts saw a 20K block buyer (delta hedged with 5K TYM1 futures). Eurodollar futures sit +1.0 to -0.5 through the reds, with the whites outperforming. A 20K screen lift of EDZ1 and 33K of screen steepener flow in EDZ1/M2 drew attention in an active overnight session for Eurodollar futures.

• A reminder that the curve steepened a little on Tuesday, with 20s providing the weak point, cheapening by ~2.5bp come the bell. Concession ahead of 20-Year Tsy supply unwound the early NY bid, which stemmed from softer than expected U.S. retail sales data, although ranges were limited. The dip resulted in a particularly well received round of supply, stopping through WI by 2.0bp. The cover ratio seen at the auction moved higher vs. prev., while dealer participation slid comfortably below the recent averages. This provided a fresh bid, before some weakness crept back into the long end ahead of the bell. The following rounds of flow were observed during the NY session, a TY/WN block flattener was seen ahead of the bidding deadline for the aforementioned round of 20-Year supply (8,069 TY vs. 2,000 WN), while the FVM1 123.50/122.50 put spread saw a 12K bought on screen. Eurodollar futures flow saw a 20K block buyer of EDZ5, which came in the wake of 2x 20K block sales in recent weeks and looked to be short cover.
• Central bank meetings are at the fore this week, with the aforementioned FOMC decision headlining on Wednesday, while the upcoming Sino-U.S. summit in Alaska is set to bring about little in the way of tangible progress re: any of the well-defined areas of dispute.