Coiling Into FOMC

T-Notes coiled in Asia-Pac trade, in a typical pre-FOMC decision setup for the timezone, last dealing unch. at 137-12. The modest bear steepening seen after the re-open was unwound with cash Tsys now hovering around unchanged levels across the curve. Eurodollar futures are unchanged through the reds, with volume there particularly light. Flow has been dominated by the now familiar TYJ1 risk reversal block trade (with another 10K of TYJ1 133.50 puts lifted against TYJ1 138.00 calls).

• It was another limited Tokyo session for JGBs, with the cash space little changed out to 10-Years, and slightly softer further out, while swap spreads are a touch wider across the curve. JGB futures stuck to the range established in overnight trade, last -6. The latest round of BoJ Rinban operations saw the purchase sizes held steady, with the following cover ratios observed: 1-3 Year: 3.18x (prev. 3.01x), 10-25 Year: 4.82x (prev. 4.78x).
• Aussie bonds added to the early Sydney weakness on the back of the slightly stronger round of domestic Q4 CPI print, although most of the gains were fuelled by mechanical moves (tax hikes and subsidy rollback) as opposed to demand-side matters, with all 3 of the major Y/Y metrics still some way shy of the magic 2.0% mark. This allowed the longer end to recover from worse levels of the day, with YM -0.5 and XM -3.0 at typing (cash trade played catch up on the back of Tuesday's local holiday).