Edging Higher Pre-FOMC

Tsys are a little stronger Wednesday though within yesterday's narrow ranges ahead of this afternoon's FOMC decision (1400ET; 1430ET press conference).

• Sep 10-Yr futures (TY) up 2.5/32 at 132-19.5 (L: 132-15.5 / H: 132-20), volume <170k.
• The 2-Yr yield is down 0.2bps at 0.1611%, 5-Yr is down 0.5bps at 0.7758%, 10-Yr is down 0.7bps at 1.4854%, and 30-Yr is down 0.2bps at 2.1843%.
• Not much more to say at this point about the Fed decision that's not in our preview.
• Arguably the stage is set for a hawkish surprise given the Tsy rally over the past month; if so, that's most likely to be initially delivered via the decision through the dot plot (in case of a 'solid' 2023 hike dot and maybe some more dots drifting into 2022).
• But the statement won't see major changes, and Powell's messaging is unlikely to be much different from vs previous pressers. The slightly hawkish tilt there (which is widely expected, it seems) would be Powell opening by noting the FOMC is beginning to think through their options on adjusting asset purchases - but with only "transitory" inflation so far and slow jobs growth, are still quite a ways from reaching the "substantial further progress" marker.
• So Powell's emphasis likely on just "talking about talking about tapering" for now.
• It's not just FOMC today: housing starts/building permits data out at 0830ET, alongside import/export price indices.
• In supply: $35B 119-day bill auction at 1130ET. No NY Fed operations due to FOMC.