Tight Re-Open After FOMC-Driven Bear Steepening

A tight round of early Asia-Pac trade for TYZ1, with the contract operating around late NY levels, a little off Wednesday's post-FOMC lows.

• Bear steepening was the theme post-FOMC, after a Japanese holiday and pre-event jitters made for tight ranges ahead of the monetary policy decision, with the major cash Tsy benchmarks cheapening by 1.5-6.0bp come the 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."
• Wednesday also saw the Tsy deploy the widely expected cuts to coupon supply in its quarterly refunding announcement, while the latest round of ADP employment data topped exp. (although there was a modest negative revision to the Sep print), which helped the space away from early session highs.
• There is nothing in the way of tier 1 risk slated for Asia-Pac hours, with a holiday in Singapore set to thin liquidity during the overnight session. Weekly jobless claims, challenger job cuts and unit labour cost data headline the local docket on Thursday.