China Risk-Off Keeps Lid On Yields As FOMC Gets Underway

In a replay of Monday, the overnight session was dominated by a continued meltdown in China/Hong Kong stocks resulting in a global safe haven bid. Once again Treasury yields appear to have stabilized by mid-morning Europe time and are off lows, but the curve remains flatter.

• The 2-Yr yield is down 0.8bps at 0.2055%, 5-Yr is down 2.4bps at 0.6971%, 10-Yr is down 3.9bps at 1.2511%, and 30-Yr is down 3.9bps at 1.9027%.
• Sep 10-Yr futures (TY) up 5.5/32 at 134-12 (L: 134-03 / H: 134-16) - though nothing special volume-wise (~340k).
• The 2-day FOMC meeting gets underway this morning, with taper talk in focus (though the fall in yields may garner some attention around the table too) - our preview went out yesterday.
• Durable goods orders (0830ET) is the data highlight, with a couple of house price metrics (FHFA and S&P CoreLogic) to follow at 0900ET. Then at 1000ET we get Conf Board consumer confidence alongside Richmond Fed manufacturing.
• In supply: $20B 42-day bill sells at 1130ET, but focus is on $61B 5Y Note auction at 1300ET. NY Fed buys ~$1.425B of 10-22.5Y Tsys.