Bessent's emergency may rekindle interest rate expectations

Bessent ' s emergency initiative could rekindle the market ' s expectations of interest rates and provide a new basis for the Fed ' s eagles. This change may dominate interest-rate transactions in the coming days, as it reframes the buy-back story as a potential monetary policy trigger. If the Fed considers the easing of financial conditions to be important, it would represent a completely new interest-rate path, unlike the interest-rate cases driven by the inflation data that have been declining since the July meeting. Markets have excluded interest-rate risk, as data have weakened rather than financial easing, and the Fed’s response would surprise markets that have been trading old, data-driven narratives. The United States dollar is at the centre of this cross-trip and is weakened by the buy-back itself, but there is an asymmetrical upward risk if interest-rate pricing returns. Over the next few days, close attention will be paid to the public comments of Fed Chairman Warsh to obtain any signal that the Fed is interested in this financial channel. The aggressive bond buy-back expansion of the Treasury aimed at quelling the market, but could have the opposite effect on the interest rate expectations, providing the Fed ' s hawks with a new, non-data-related interest rate increase。