Twist Flattening Pre-FOMC

A flat start for TYZ2, operating around late NY levels, just above Tuesday’s base, printing -0-01 at 110-17+.

• To recap, cash Tsys twist flattened on Tuesday, running 6bp cheaper to 7bp richer, pivoting around 10s.
• Firm JOLTS job opening data and a modestly firmer than expected headline ISM m’fing reading (albeit accompanied by contractionary prices paid and new orders sub metrics, while the unemployment sub-index printed at the breakeven 50 level) were seen.
• Fiscal dynamics in the UK, and a resultant rally in Gilts, provided a bid during the London morning, although the aforementioned data releases helped turn the space away from best levels, with a block seller in FV futures (-5.5K) aiding the post-data cheapening.
• A block buy in WN futures (+2K) helped the flattening impulse extend later in the NY morning.
• Some misinterpreted headlines out of the White House re: Fed policy then provided some contained vol.
• Participants are now zeroed in on risk events due during Wednesday’s NY session, which will be dominated by the latest FOMC decision (see our preview of that event here) and quarterly Tsy refunding announcement (see our preview of that event here)