The week opens with the $32 trillion Treasury market shut for Columbus Day and Japan on holiday for Sports Day, thinning liquidity before the two data mornings that will set the Fed’s path into the October 27-28 FOMC. September CPI lands Wednesday at 8:30 AM ET with consensus at 0.6% month on month, up from 0.4%, and 3.6% year on year, up from 3.4%, while core is seen cooling to 0.2% from 0.3% for a 2.5% annual rate. Thursday brings September PPI, retail sales and jobless claims at the same hour, and then Fed Chair Kevin Warsh at 15:30 GMT, his final scheduled appearance before officials go quiet on October 17.
The setup is a market that has not stopped repricing upward. The 10-year closed September with its biggest quarterly jump since 1994 and sits at 5.24%, its highest since 2002, with the 30-year at 5.60%. Last week’s supply was absorbed without visible strain: the Treasury’s $119 billion three-day round of 3-, 10- and 30-year auctions on October 6-8 drew strong demand at yields above 5%, in line with its regular financing calendar. But stress markers are flashing beneath the calm: the cost of hedging against a 200-basis-point rise in rates over three months has reached 132 basis points, its highest since the March 2023 banking crisis, and implied volatility on one-month 10-year swap options sits at 21.4 basis points.
Bank of America raised the stakes Monday, forecasting the Fed hikes twice more this year, in October and December, arguing the central bank risks falling behind the curve if it pauses, and lifting its third-quarter GDP estimate to 3.5% annualized from 2.4%. The bank’s own framing admits the tension: policymakers appear to prefer a quarterly pace, which would mean December and March rather than back-to-back moves. Warsh has been reshaping expectations himself, telling the ECB forum in Sintra that the era of forward guidance is over in favor of a meeting-by-meeting, data-dependent approach, which makes Thursday’s remarks the first unscripted read on how he weighs a 0.6% headline month against a cooling core.