What is the Fed doing today?
The Federal Reserve releases minutes from its September 15-16 meeting at 2:00 PM ET, the first full readout of internal debate since Kevin Warsh took the oath of office as Fed Chair on May 22. The federal funds target range has sat at 3.75-4.00% since that meeting. Markets spent the summer leaning toward cuts. The pricing for the Fed's next decision, on October 28, tells a different story now.
What does Fed funds futures pricing actually show for October 28?
OpticAlpha's live CME FedWatch-style tracker puts 78% odds on the Fed holding at 3.75-4.00% on October 28, and 22% odds on a hike to 4.00-4.25%. There is no meaningful weight on a cut anywhere on that ladder right now. This week's move was actually 5 basis points more dovish than before, which says something about how hawkish the prior pricing had gotten.
Why does the probability skew get more hawkish further out?
Walk the FedWatch ladder past October and the lean doesn't ease, it builds. By the December 9 meeting, 67% odds sit on 4.00-4.25%, a full quarter point above today's range. By January 27, the 4.25-4.50% bucket carries 44%. By April 28, 2027, the combined weight on 4.50-4.75% and 4.75-5.00% outstrips every other bucket on the board. Futures are pricing a resumed hiking cycle, not a pause before cuts.
Why is the Treasury curve bear-steepening into the minutes?
Every maturity on the Treasury curve moved today, but not evenly. The one-month bill eased 0.8 basis points to 3.935%, while the 2-year rose to 4.808% and the 10-year jumped 6.6 basis points to 5.337%. The 30-year led everything at 5.716%, up 7.5 basis points on the day. Long yields rising faster than short ones is a bear steepener, usually a sign the market wants more compensation for holding duration, not a signal that relief is close.
What is the credit market pricing in?
The high-yield spread over Treasuries, tracked in benchmark form by the St. Louis Fed's OAS series, sits at 3.12% on OpticAlpha's live feed, up from roughly 2.4% at its summer low. Most of that move happened in the past two weeks. Widening spreads mean investors want more compensation to hold junk-rated debt, typically one of the earlier signals that the market expects tighter financial conditions ahead, not easier ones.
Minutes from a meeting that closed three weeks ago carry less weight for pricing than this afternoon's dot-plot debate will. A hawkish read mostly confirms what the curve and the credit market have already done on their own. A dovish surprise leaves the October 28 futures ladder with three weeks to unwind a lot of repricing, and Warsh's committee has shown no urgency so far to make that easy.
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