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Tsys Bid Ahead ADP Employ, Tsy Quarterly Refunding, FOMC Annc

US TSYS
Carry-over support in rates overnight, Tsys steady march higher/near overnight highs on light volumes (TYZ1<200k) with Japan mkts out on holiday. Yield curves back to flattening, 5s30s taps 78.261 low.
  • Focus on FOMC (1400) and Fed chair Powell presser (1430ET): Fed expected to announce tapering of net Tsy purchases by $10B/m and mortgage securities by $5B/m, ending $120B monthly QE program by mid-2022. Note: decent carry-over short end bid from accts toning down pace of rate-hike bets in 2022-2023.
  • Private ADP employment on tap at 0815ET (+400k est vs. +568k prior), US Tsy quarterly refunding at 0830ET: coupon issuance reductions are expected (3Y -$2B to $56B; 10Y -$3B to $38B; 30Y -$2B to $25B), no auctions or Fed buy operations.
  • Overnight trade included two-way in 2s-7s with better buying on net from leveraged accts, real$ selling into strength in 10s and 20s.
  • Currently, 2-Yr yield is up 0.2bps at 0.452%, 5-Yr is down 0.8bps at 1.1395%, 10-Yr is down 1.6bps at 1.5331%, and 30-Yr is down 1.9bps at 1.9403%.

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