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2026-09-16 21:26:12
[US Treasuries Ignore Strong Data, Rate Hike Expectations Already Paid In] ⑴ US retail sales and import/export data both exceeded expectations, providing further evidence for the widely anticipated 25 basis point rate hike at today's Fed meeting. ⑵ Federal funds futures indicate that the probability of a 25 basis point rate hike today remains at approximately 91%, with probabilities of another 25 basis point hike in October and December reaching approximately 95% and 99%, respectively. ⑶ Overnight funding rate futures have fully priced in a cumulative rate hike of approximately 75 basis points by the end of the year. ⑷ However, US Treasuries were barely affected, with traders attributing the strong August retail sales to back-to-school season essential purchases. ⑸ US Treasury prices fell slightly after the data release, but the decline was limited, with buyers waiting on the sidelines. Hedge funds bought some futures contracts during the decline, and commodity trading advisors also made small purchases. ⑹ Subsequent trading was two-way, mainly driven by the unwinding of large positions prior to the Fed's decision. (7) Algorithmic participation was noticeably absent; the 10-year and 30-year yields encountered resistance at approximately 4.96% and 5.35% respectively, and the rest of the yield curve was also far below the technical levels that would trigger the algorithm. (8) In terms of data, import prices rose approximately 0.7% month-on-month in August, export prices rose approximately 0.6% month-on-month, and retail sales rose approximately 1.2% month-on-month and approximately 6% year-on-year. (9) Excluding automobiles, retail sales rose approximately 1.4% month-on-month; excluding automobiles and gasoline, retail sales rose approximately 1.2% month-on-month; and the control group rose approximately 1.4% month-on-month. (10) Overall, the strong data did not change the pricing of interest rate hikes; the market focus shifted to the dot plot and the wording of the statement. Future attention will be focused on whether the subsequent interest rate hike path can meet current expectations.
