Off Asia Lows, Japanese Holiday Limits Price Action & Volumes

The cocktail of a Japanese holiday and proximity to Wednesday's FOMC decision has made for light Tsy trade in Asia, with a little over 40K TYZ1 contracts changing hands thus far. That particular contract last deals +0-00+ at 130-31+, with a downtick in oil & bid in ACGBs helping the move away from early session lows, while TYZ1 proved resilient to the pullback seen in ACGBs late in the Sydney day. A reminder that the Japanese holiday means that cash Tsys will not open for trade until London hours. Looking ahead to the NY session, ADP employment data is due to hit (ahead of Friday's NFP print). Elsewhere, the latest FOMC decision is expected to result in a $15bn/month tapering announcement, while most of the attention is set to fall on the Fed's communication surrounding inflation dynamics and any further signals on the rate hike outlook. The final point of note comes in the form of the Treasury's quarterly refunding announcement.

• It didn't take long for a bid in ACGBs to come back into play, as the follow through from yesterday's RBA decision continues to be observed, reversing the early Sydney trans-Tasman driven softening, which came on the back of the larger than expected downtick in NZ unemployment. The internals surrounding the latest round of ACGB Nov-31 supply weren't the strongest in recent memory (as fleshed out in an earlier bullet), but the auction still passed smoothly enough in the grander scheme of things, which provided another likely aid for the bid. YM +2.5 & XM +4.0 at the close, after fading back from best levels and failing to test their respective overnight highs. 10s led the rally in the cash ACGB space. The IR strip settled unchanged to 15bp richer through the reds, with IRZ2 leading the bid there.