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The Fed Raised. The Ten-Year Went the Other Way.
Wednesday the committee lifted the policy rate a quarter point. Thursday the entire curve fell. The ten-year dropped more than seven basis points to 4.93%, back under the five it had taken two days earlier. The thirty-year lost six. Even the two-year, which had just spiked on the hawkish projections, gave back five. The Fed made money more expensive and the bond market made it cheaper.
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The Breakdown
Today’s disagreement: the Fed set the price of money on Wednesday and a pipeline near Hormuz reset it on Thursday.
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| 01 |
The Whole Curve Rallied
Ten-year at 4.93%, down more than seven basis points. Thirty-year at 5.282%, down more than six. Two-year at 4.67%, down more than five, one day after touching 4.744% and its highest since July 2024.
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| 02 |
What Actually Moved It
Not the Fed. A pipeline dispute near the Strait of Hormuz was resolved and Saudi cargoes began moving through Oman. Crude slid hard, though it stayed above $100. War premium came out, and the inflation trade came out with it.
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| 03 |
The Labour Number Few Were Waiting ForInitial jobless claims fell 10,000 to 196,000, against a 206,500 consensus and close to July’s sixty-year low. The Philadelphia Fed index slowed to 37.8 from 47.4 and still beat the 32.1 estimate.
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Thursday’s Close
| 10-Year Treasury | 4.93%, down over 7 bp |
| 30-Year Treasury | 5.282%, down over 6 bp |
| 2-Year Treasury | 4.67%, down over 5 bp |
| S&P 500 | 7,637.76 (+1.14%) |
| Nasdaq Composite | 26,418.30 (+1.69%) |
| Initial Jobless Claims | 196,000, down 10,000 |
Thursday, Sept. 17 levels. Yields move through the session and will differ by the time you read this. Sources: CNBC; Benzinga; CappNotes; Saxo; Investrade.
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A Pipeline Beat the Committee
Two Days, Two Directions
On Wednesday the front end spiked. The two-year hit 4.744%, its highest since July 2024, because the projections said one more hike was coming. On Thursday the same note fell to 4.67%. The ten-year gave back everything it had gained crossing five. A tightening cycle opened. The curve moved as though it had closed.
Why Crude Runs This Market
Warsh spent his press conference on inflation. He was right that it is too high. He was also describing a problem the Fed does not control. Not with rates. This inflation came out of a war and a shipping lane. When the pipeline dispute near Hormuz cleared and Saudi barrels started moving through Oman, the market repriced inflation in a single session. No committee did that.
What the Labour Data Removes
Claims came in at 196,000, ten thousand below the week before and well under the 206,500 the street wanted. That is near a sixty-year low. It takes the usual objection off the table. A hiking cycle normally gets stopped by a cracking jobs market, and this jobs market is not cracking. If the committee wants the second hike, the labour side is not going to argue.
The Level to Watch
The line is the ten-year at 5.00%. It crossed on Tuesday, held through the decision, and fell back under on Thursday. Hold below it next week and Thursday was a repricing that sticks. That would mean the market thinks oil solved what the Fed was hiking against. Cross back above and the relief was one session of good news from a shipping lane. Watch the barrel, not the statement.
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The Fed moved a quarter point. A shipping lane moved more.
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