AFS Markets Blog: Morning 11/11/2026

• Meanwhile in markets, following yesterday’s hotter than expected CPI print, UST yields closed sharply higher – rising 7-18bps in a bear-flattening move. The 18bps jump in the 2y UST yield marks its largest one-day rise since President Trump’s Liberation Day tariffs got halted in April 2025. UST yields are set to remain at these levels today, with Veterans Day holiday leaving US bond markets closed;

• President Trump likes to fret about Jerome Powell acting as a shadow chair, pushing for higher rates, but Powell himself has stepped out of the limelight. Instead, Governor Christopher Waller is dictating the hawkish narrative on the FOMC, offering some rather direct forward guidance yesterday (sorry, not sorry, Chairman Warsh). Following Waller’s speaking engagement – during which he argued that a 50bps hike should be on the table if core CPI continued to print hot in October (which it did) – a chorus of four regional Fed presidents has joined the hawkish messaging overnight. While none went so far as to openly call for a potential a 50bps hike, their comments focused on what Chicago Fed President Goolsbee described as “borderline disturbing” inflation. A minimum of a 25bps hike at the December meeting looks locked in;

• Looking further ahead, the likes of Dallas Fed President Logan have argued (in line with Waller) that at least two more 25bps hikes are required. Talk of a quicker pace of tightening also puts January firmly on the table for back to back hikes, which I think is more likely than a 50bps hike in December. Does that mean everyone has jumped on the hawkish bandwagon? Not quite. Fed Governor Bowman flagged the risk that an AI-driven equity market correction could spill over into the real economy, arguing that higher interest rates could further strain activity. Still, even she had to acknowledge that inflation is proving more persistent than expected;

• Shifting to markets, Fed funds futures now price in ~30 bps of hikes for the December FOMC up from 20bps on Monday. Yes, a 50bps jumbo hike is now in the conversation – even if it isn't punters' and my base case. Further out, Fed fund futures price in three more 25bps hikes (or a 50/25bps combo) until the Fed reaches its terminal rate, with pricing peaking at 77bps by late summer 2027;

• Moving to broader market commentary, tech-heavy equities are largely rallying this morning with the Kospi up 2.6 percent. Nasdaq futures have erased yesterday’s losses this morning – up over a percent at pixel time. Bund yields are down marginally this morning, while EURUSD is trading at 1.115. Brent crude is trading at $92 a barrel;

• Looking ahead, it’ll be a day for headline surfing with attention firmly on the Middle East – with the focus on both Iran and the second day of the US-Ukraine-Russia trilateral in Abu Dhabi. Besides that, the only real action today comes from a handful of ECB speakers this morning – with our compatriots across the Atlantic off for Veterans Day.

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