October Fed hike odds slide to ~26% as Treasury yields reverse off intraday highs; stocks bounce into the close
What happened
Traders sharply cut bets on a Fed rate hike at the October 27-28 meeting: CME FedWatch odds fell to 26% in Thursday afternoon trading from 37.6% the prior day, per MarketWatch. The repricing drove a bond-market reversal — the 10-year Treasury, which had touched 5.347% in the morning (fresh multidecade high), slid back to 5.25%, while the rate-sensitive 2-year yield dropped about 9 basis points to ~4.79%. Equities responded with a late-day bounce: the Dow, S&P 500, and Nasdaq all turned modestly higher into the close. Talaria Capital's Christopher Shaffer told Barron's he sees major Q4-start flows into Treasury ETFs and doubts the Fed delivers 'four rate hikes over the next twelve months'; odds of 100bp+ of additional hikes over 12 months have fallen to 38.5% from 58.5% a week ago.
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Start your free 14-day trialWho’s affected
- Broad equities: Dow, S&P 500, Nasdaq all rose late Thursday on the repricing. Growth/tech benefit most from lower rate expectations (Nasdaq led). Rate-sensitive sectors (utilities, real estate, small caps via Russell 2000) get relief from the yield reversal. Treasury-bond ETFs (iShares 1-3Y, 7-10Y, 20+Y) saw fresh inflows to start Q4 per Talaria Capital. Gold/bitcoin typically benefit when hike odds fade.