Tsys Post Marginal Gains Pre-FOMC, Flattening Hits Cash ACGB Curve

All eyes were on the impending announcement of the monetary policy decision from U.S. Fed, with continued assessment of Omicron risks and simmering Sino-U.S. tensions in the background.

• T-Notes ground higher, albeit very reluctantly. They last change hands +0-02 at 130-22+. Cash Tsy yields sit 0.2-0.9bp lower across the curve, with belly outperforming at the margin. Eurodollar futures last trade unch. to +1.0 tick through the reds. Note that U.S. retail sales & Empire M'fing Survey will hit the wires today, albeit they will be overshadowed by the latest showing from FOMC members.
• JGB futures went bid, topping out at 152.09 after the Tokyo lunch break. They last trade at 152.07, 5 ticks above previous settlement. Cash JGB yields sit slightly lower across the curve. The final reading of Japan's Oct industrial output was revised higher, while the BoJ conducted Rinban ops covering 1-10 & 25+ Year JGBs, but the JGB space was unfazed. BoJ Gov Kuroda told lawmakers that policymakers intend to continue persistently with its monetary stimulus.
• Overnight impetus weighed on cash ACGBs in early trade, with the short-end extending losses later on, which was paralleled by a recovery in the longer-end. This flattening dynamic leaves us with yields sitting 1.3-6.3bp higher across the curve. YM last trades -3.8 & XM -2.3, while bills run 2-6 ticks through the reds. Aussie bonds shrugged off a marginal deterioration in Westpac Consumer Confidence, as headline index remained in positive territory. Across the Tasman, NZGBs went bid after New Zealand slashed planned debt issuance over the next four years, but there was no real follow-through in ACGBs.