Williams calls another hike reasonable, the 30-year touches a 2004 high, and claims stay low

What happened

New York Fed President John Williams said Thursday it is "reasonable" to expect another rate hike by the end of the year and that the time for explicit forward guidance is over, and CME's FedWatch put the odds of an October increase at 77.5%. Speaking at the London Macro Policy Forum, he said "we have to see. We're going to collect the data and do what we did between July and September"; the odds were about 53% on Wednesday morning, and the 30-year Treasury yield touched 5.446% in early trading, its highest since June 2004. (CNBC, CNBC on the 30-year)
Initial US jobless claims fell to 197,000 last week, the fewest since mid-July, the Labor Department said Thursday, as layoffs stayed rare. The prior week was revised to 198,000 and the four-week average eased to 202,250, a firm labor reading landing a day after the hot business-activity data that drove hike odds higher. (AP, via Bozeman Daily Chronicle)
Hedge funds' leveraged Treasury basis trades have shrunk about 20% this year to roughly $1.2 trillion, Morgan Stanley estimates, removing some of the borrowed-money amplification that worsened past bond selloffs. A Reuters analysis attributes the pullback to lower profits rather than forced selling: a mostly orderly rise in rate expectations, softer asset-manager demand for Treasury futures, higher Treasury inventories at big dealer banks after a rule change, and Treasury's buybacks, which have lifted prices of older off-the-run bonds and squeezed the trade's gains. Bank of America's Meghan Swiber says the opportunity set is simply smaller; the retreat so far is concentrated in 2-year and 5-year futures. Whether the buyback is what tipped it is Reuters' framing of one contributing factor among several, not a finding. (Reuters via Kitco, Reuters)
Cleveland Fed President Beth Hammack said Thursday that inflation pressures remain elevated and the risks are tilted to the upside, and that the longer the situation persists the harder it will be to bring prices back to target. Hammack was one of three officials who dissented for a hike at the July meeting; her remarks came hours after New York Fed President John Williams called another year-end hike "reasonable" and left markets pricing about a 77% chance of an October increase. (Reuters, Seeking Alpha)
Treasury sold $44bn of 7-year notes on Thursday at a 5.085% high yield, up from 4.512% four weeks earlier, with a 2.42 bid-to-cover ratio and a tail of about 0.7 basis point. Treasury's results show indirect bidders took 57.2% of the notes, directs 30.3% and primary dealers 12.5%; BiFu grades the sale C- against averages of 2.49 for bid-to-cover and 64.6% for indirects, better than Wednesday's 5-year sale at 5.033% with a 2.21 cover. The 7-year traded near 5.10% at 3:10pm ET. (BiFu, FiscalData auction record)
Treasury's buyback of 20- to 30-year bonds on Thursday accepted $4.08bn of $10.47bn in offers, about two-thirds of the $6bn ceiling, and the 30-year yield stood at 5.469% at 3:10pm ET, above its 5.446% morning high. Twelve of 35 eligible issues were accepted in the 1:40 to 2pm ET operation; the 09-10 operation in 10- to 20-year debt took $5.19bn of a $6bn cap and the 09-17 operation in 7- to 10-year debt took $2.385bn of a $4bn cap. Oxford Economics' Ryan Sweet said Treasury will struggle to lower borrowing costs through buybacks alone. (FiscalData buyback record, The Telegraph live blog via Yahoo Finance)
Philadelphia Fed President Anna Paulson said Thursday that "some modest further tightening may be warranted" after last week's rate increase to 3.75%-4%, and fed funds futures now imply roughly four more quarter-point increases by the end of 2027. She put underlying inflation at 2.5% to 3%, "well above our 2% target"; CNBC read the October hike probability at 64% (CME FedWatch), lower than the 77.5% Thursday-morning read, with Reuters at about 70% at 2:35pm ET. (CNBC)

Sources 12

CNBC cnbc.com high 0.85
CNBC on the 30-year cnbc.com high 0.85
AP, via Bozeman Daily Chronicle bozemandailychronicle.com unrated
Reuters via Kitco kitco.com unrated
Reuters reuters.com high 1 generally reliable
Reuters reuters.com high 1 generally reliable
Seeking Alpha seekingalpha.com solid 0.694
BiFu bifu.co unrated
FiscalData auction record api.fiscaldata.treasury.gov unrated
FiscalData buyback record api.fiscaldata.treasury.gov unrated
The Telegraph live blog via Yahoo Finance finance.yahoo.com mixed 0.517
CNBC cnbc.com high 0.85

Credibility ratings combine two public datasets: Lin et al. 2023, PNAS Nexus 2(9):pgad286 (CC BY 4.0) for the domain-quality score, and Wikipedia's perennial-sources list (CC BY-SA 4.0) for the reliability tier. A rating describes an outlet's general record, never this particular article. Unrated means absent from those datasets — not a judgement.

The Projection

Williams calls another hike reasonable, the 30-year touches a 2004 high, and claims stay low

What happened

Sources 12

The wider story