Futures Cheapen As Asia Reacts To Fed, Regional News Flow Helps Limit Losses

The major Tsy futures contracts showed through their respective Wednesday bases during early Asia-Pac trade as regional participants reacted to the latest FOMC decision.

• To recap, the Fed delivered the widely expected, unanimous 75bp rate hike yesterday, although the statement pointed to a Fed that would assess “the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation,” even as it looks to attain a sufficiently restrictive stance of monetary policy. This gave the statement a dovish feel, although Chair Powell’s press conference was more hawkish, resulting in some late NY vol. as he flagged a “ways to go” for the Fed, in addition to expectations for a higher than previously foreseen terminal rate level, even as he pointed to likely discussions re: the potential slowing of the pace of hikes over the next couple of meetings.
• Asia-Pac news flow (including the latest round of North Korean missile launches, China’s continued focus on its zero COVID policy and softer than expected Chinese Caixin services PMI data) allowed the space to stabilise, before drifting lower again into London hours.
• TYZ2 is -0-16+ at 110-03+, just off the base of its 0-06+ range on light volume of ~65K. Cash Tsys are closed until London hours, owing to the observance of a Japanese national holiday, which thinned out liquidity in Asia
• Thursday’s London docket is headlined by the latest BoE decision (with consensus looking for a 75bp hike after the recent fiscal saga and related vol. surrounding UK markets & BoE pricing.), with the NY docket including the ISM services survey, Challenger job cuts, weekly jobless claims data and factory goods orders.