Stuck Between FOMC & NFPs

TYZ1 was hemmed in a 0-05 range overnight, last -0-03+ at 130-21, while cash Tsys are little changed across the curve (-/+0.5bp vs. settlement). There has been a couple of spurts of activity, but markets have failed to latch onto anything in an Asia-Pac session that has been bereft of headline flow and further hampered by lower liquidity on the back of the observance a national holiday in Singapore and the proximity to Friday's NFP. This came after the post-Fed bear steepening into the NY close. To recap, the FOMC confirmed its initial $15bn/month tapering plan ($10bn Tsys & $5bn MBS), which will get underway this month. The central bank stressed that "similar reductions in the pace of net asset purchases will likely be appropriate each month, but it is prepared to adjust the pace of purchases if warranted by changes in the economic outlook." Chair Powell was quick to reiterate that the Fed's tapering move does not put an imminent rate hike on the table, which facilitated the aforementioned steepening. On inflation, the Fed noted that "inflation is elevated, largely reflecting factors that are expected to be transitory," a tweak from the previously employed "inflation is elevated, largely reflecting transitory factors." Weekly jobless claims, challenger job cuts and unit labour cost data headline the local docket on Thursday. Note that House Majority Leader Hoyer has suggested that the House could vote on the well-documented fiscal spending initiatives as soon as Thursday.

• After unwinding the gains registered in the pre-holiday overnight session, JGB futures regained some poise as the Nikkei 225 pulled back from early highs, last +5, while the major cash benchmarks run little changed to ~1bp richer across the JGB curve. The proximity to the recent multi-year year highs for 10-Year breakevens promoted a smooth enough JGBi auction, with the cover ratio moving up from the multi-year low seen at the previous offering. Still, the fact that Japan continues to experience benign inflationary pressures (at best) will have provided a cap when it comes to broader demand. Elsewhere, discussions between PM Kishida & BoJ Governor Kuroda provided no fresh information.
• The Aussie bond curve was subjected to twist flattening pressure on Thursday, YM -6.0 and XM +2.0, with futures finishing off of worst levels after selling accelerated in the wake of a break of the overnight lows for both contracts (albeit with a lack of overt headline flow to drive the move).