Firmly believe the Fed will hike rates tonight! The US bond market sees an "extreme bearish" stance, with the 10-year Treasury yield rising to its highest since 2007.
BlockBeats news, September 16 — Short positions in the U.S. Treasury market are piling up at the fastest pace since early 2025, with traders betting the Federal Reserve will restart its rate-hiking cycle tonight. The yield on the 10-year U.S. Treasury note rose Tuesday to its highest since 2007, while the 2-year touched its peak since 2024. Market pricing shows the probability of a 25-basis-point hike tonight has exceeded 90%.
Citi strategist David Bieber said bluntly that current short positioning is "already extreme at the tactical level"; BofA strategists noted that shorts have accumulated across the entire yield curve, with asset managers mostly cutting longs or adding shorts, and almost no money buying duration assets at low levels. JPMorgan's Treasury client survey showed that in the week ended September 14, client short positions jumped 10 percentage points in a single week, the fastest pace of adding since early 2025.
Driving the heightened rate-hike expectations is a combination of surging oil prices, rebounding inflation and concerns over fiscal deficits. Carlyle Group global head of research Jason Thomas warned that if the Fed fails to hike, or hikes without providing clear guidance on the subsequent path, it could prompt traders to demand higher yields on long-term bonds to hedge inflation risk. The SOFR options market has simultaneously seen unusually large short-volatility operations, with substantial new exposure accumulating around the 95.4375 strike in December 2026, March 2027 and June 2027 options, mainly from selling June 2027 straddles, with combined volume of about 80,000 contracts over two trading days and total premium exceeding $100 million. Although a few traders are still using SOFR call options to position for a "hold steady" scenario, the mainstream pricing direction remains for front-end futures to further price in downside risk premium, and Treasury option skew data also shows that long-end put premiums continue to exceed call premiums.
