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Cycle Highs In Sight For USD/JPY


Outlook Remains Bearish

US TSYS SUMMARY: Treasuries are heading lower as the Fed decision looms Weds.
- Sep 10-Yr futures (TY) down 8.5/32 at 127-075 (L: 127-07.5 / H: 127-18), fully
retracing Tuesday`s move higher pre-Trump Xi discussion headlines.
- Fairly quiet in overnight Asia session, with Tsys starting to head lower in
the European morning alongside other global safe-haven assets.
- Curve is a little flatter with the short-end underperforming: the 2-Yr yield
is up 3.2bps at 1.8967%, 5-Yr is up 3.3bps at 1.8654%, 10-Yr is up 2.8bps at
2.0871%, and 30-Yr is up 1.7bps at 2.5653%.
- 3M10Y and 1Y10Y spreads at/near day's highs: 3M10Y +4.139, at -12.011 (L:
-15.209 / H: -12.011), 1Y10Y +4.185 at 2.329 (L: -3.158 / H: 2.502).
- Stocks, USD and Oil basically flat.
- Notable ED flow: EDN9 98.125 Calls bought in 85k total so far, at 1.5 in 40k,
1.25 in 5k, 1.75 in 40k. Looks like new risk (Dovish bet) on Fed tonight.
- Bit of bear flattening in ED strip, Jun20 thru Mar21 down 4 ticks.
- FOMC is the day's highlight of course. Our full preview went out yesterday,
contact us if you would like a copy.