Tsys Subject To Corrective Re-Steepening Pre-Fed, BoJ Rinban Ops Eyed

Market sentiment has stabilised, with U.S. e-mini futures edging higher, as we enter the final stretch ahead of the Fed's much awaited monetary policy decision.

• T-Notes continued to grind away from Tuesday's lows as trading resumed in Asia. Recovery was capped at 114-23+ and TYU2 now trades +0-08+ at 114-21+. Eurodollars run 2.5-7.5 ticks higher through the reds at typing. Cash Tsy curve has steepened, with yields last seen 1.6-3.9bp lower. It goes without saying that the FOMC's rate decision provides the main risk event today. Just for the record, Empire Manufacturing, retail sales & terms of trade are also due.
• BoJ meet is eyed later this week (Friday) as market forces put the Bank's yield target to a test. JGB futures re-opened on a slightly firmer footing and have been rangebound since, last sitting at 147.21, down 38 ticks from the previous settlement. Cash curve has flattened a tad, driven by the super-long end, as participants assess the BoJ's action on bond purchases in a bid to keep a lid on yields. The Bank will today conduct upsized Rinban operations covering all five maturity baskets, with added purchases of JGBs beyond the 10-Year target.
• Australian FI space played catch-up with the overnight sell-off in U.S. Tsys, resulted in a fresh eight-year for 10-Year ACGB yield. Curve runs a touch flatter as we type, with yields last 11.5-13.2bp higher. The main futures contracts have lost some altitude, with YMU2 last -13.4 & XMU2 -12.5. Bills last seen 11-16 ticks lower through the reds. A monthly survey from Westpac and a weekly survey from ANZ-Roy Morgan showed erosion in consumer confidence, with the indices approaching levels seen at times of economic distress.