TREASURY WRAP: T-NOTE FUTURES (Z6) SETTLE 4+ TICKS LOWER AT 105-25+

Yield curve flattens after hawkish FOMC. At settlement, 2-year +5.2bps at 4.723%, 3-year +3.5bps at 4.807%, 5-year +2.5bps at 4.862%, 7-year +1.5bps at 4.933%, 10-year +0.6bps at 5.012%, 20-year -1.4bps at 5.395%, 30-year -1.4bps at 5.355%.

THE DAY: T-notes had gradually risen ahead of the FOMC, but Treasuries tumbled across the curve in the immediate aftermath of the Fed rate decision. The Fed hiked rates by 25bps as expected, with the decision unanimous, while reiterating its commitment to price stability within the statement. Warsh did not submit forecasts, but the vast majority of officials expect at least one further rate hike by year-end, with the median seeing rates then remaining on hold throughout 2027.

The press conference delivered a familiar message from Chair Warsh, emphasising price stability against the backdrop of employment at or near full employment and a strong US economy. He continued to avoid forward guidance but stressed the Fed's determination to return inflation to target.

Yields rose across the curve in the immediate wake of the Fed statement and press conference, with the 10-year yield reclaiming 5.00%. The curve ultimately bear flattened on the day, with the front end leading the sell-off while the long end finished modestly firmer. Money market pricing also shifted hawkishly, with October now seen as roughly a coin toss (vs. c. 8bps of tightening priced before the meeting, adjusting for Wednesday's hike), while around 32bps of additional tightening is priced by December, vs. 24.5bps pre-Fed on the same adjusted basis.

• US to sell USD 19bln of 10yr TIPS on Sept. 17th; to settle on Sept. 30th

• US sold 17-wk bills at a high rate of 4.030%, B/C 2.72x
• US to sell USD 72bln of 17-wk bills on September 16th; to sell USD 90bln of 4-wk bills and USD 85bln of 8-wk bills on Sept. 17th; all to settle on Sept. 22nd

• Fed Hike Pricing via CME FedWatch: Oct 13bps (prev. 7.8bps pre Fe), Dec 31.7bps (prev. 24.5bps pre Fed); Prior adjusted for today's hike.
• EFFR at 3.63% (prev. 3.63%), volumes at USD 100bln (prev. USD 91bln) on September 15th
• SOFR at 3.64% (prev. 3.62%), volumes at USD 2.952tln (prev. USD 2.861tln) on September 15th
• NY Fed RRP op demand at 5.38bln (prev. 0.70bln) across 4 counterparties (prev. 2) on September 16th