Looking To FOMC

A flat re-open for TYM2, last dealing around late NY levels, -0-03+ at 118-13.

• To recap, the cash Tsy curve twist flattened on Tuesday, pivoting around the 7- to 10-Year zone of the curve, with 10s having another brief and shallow look above 3.00% in London hours, before richening away from worst levels of the session. 2s finished the session ~5bp cheaper, leading the weakness in the front end of the curve, while 20s and 30s richened by ~2.5bp.
• Front end weakness came ahead of Wednesday’s FOMC decision, with a 50bp rate hike seen as a lock, while block trades were a large factor when it came to price action out to the belly. Notable block activity was observed in both TU & FV futures. Outright block flow in TU futures was mixed, although biased to selling, while FV activity was skewed more towards buying. TU/FV flattener block flow was also seen.
• A bid in equities applied some pressure to the space during the latter rounds of NY dealing, before the respective moves faded a touch.
• A quick reminder that cash Tsys will be closed until London hours owing to the observance of a Japanese holiday, with the final day of the Chinese holiday period set to limit liquidity further in Asian hours.
• Looking ahead, the aforementioned FOMC decision headlines on Wednesday (see our full preview of that event here), with the latest quarterly Tsy refunding announcement, ADP employment data and ISM services survey also due.