MediumIV Macro Policy & Sovereign Debt19 October 2026, Monday
Barclays now expects Fed hikes in both December and January
Barclays has added a second 25 basis point Fed hike, in January, to its forecast. With WTI back above $99, the US 10-year yield rose 6 basis points to 5.144% on 19 October. Markets price a 16% chance of an October hike and roughly 92% for December.
Barclays now expects the Fed to raise rates by 25 basis points in both December and January, according to Newsquawk's morning round-up on 19 October. The bank had previously forecast a single hike in December. FXStreet reported that WTI recovered the same day from lows below $97 to trade above $99. The US 10-year Treasury yield rose 6 basis points to 5.144%, while gold slipped 0.54% to around $4,140 an ounce.
Prime Terminal data show markets pricing a 16% probability of a hike at the 27–28 October meeting and roughly 92% for December. The Fed raised its policy rate by 25 basis points in September. According to Chase's round-up of 14 October, September CPI came in at 3.7% year on year, with core CPI at 2.6%. J.P. Morgan's base case is a pause in October, followed by up to 50 basis points of further hikes before the cycle ends.
Newsquawk put the dollar index up 0.1% at 101.83 on the morning of 19 October, with euro/dollar at 1.1230. Fed officials are in their pre-meeting blackout. FXStreet notes that this week's calendar holds only weekly jobless claims, the ADP four-week average and S&P Global's flash PMIs. The shift in pricing from October to December suggests yields now respond more to oil than to the Fed decision itself. A $2 move in oil matched a 6 basis point rise in the yield on the same day.
Talay assessment
Bottom line
Markets have pushed the next Fed hike from October to December, and Barclays has stretched the cycle into January. The 10-year yield reaching 5.144% shows the far end of the curve is now tied more to the oil price than to the Fed's October decision. The most likely path is a hold on 28 October, accompanied by hawkish guidance pointing to December.
Likely effects
- US TreasuriesNegativeWeeks
The 10-year yield rose 6 basis points as oil returned to $99; extended-maturity borrowing costs are moving with oil, independently of the Fed decision.
- Dollar and goldUncertainWeeks
Pricing of a 92% chance of a December hike supports the dollar; gold fell 0.54% the same day to around $4,140 an ounce.
- Emerging marketsNegative1–6 months
A Fed hiking cycle stretching into January would keep external financing costs high for dollar-indebted emerging economies, Türkiye among them.
Possibilities, ranked
- 1Hold in October, signal December65%
The Fed holds rates on 28 October, and both the statement and the press conference leave a December hike open.
Watch: The 28 October FOMC statement and Warsh's press conference
- 2Oil eases, cycle ends sooner20%
A stopgap arrangement in the Strait of Hormuz pulls oil lower, December hike pricing fades and a January move comes off the table.
Watch: December Brent futures falling below $100
- 3Surprise October hike15%
Oil and inflation data push Warsh into a 25 basis point hike in October.
Watch: WTI before the meeting and the 5.30% threshold on the 10-year yield
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- US 10-year▼ 5.144%
- December hike probability▼ ~92%
- Gold▼ −0.54%
Historical context
US 10-year yield, last 6 months
- 117/09 · Fed dot plot median for 2026 rises to 4.00-4.25% while the 10-year yield eases from 5.04% to 4.94%
- 221/09 · The Fed's Goolsbee: if inflation is coming from demand, the rate response will be sharper and front-loaded
- 323/09 · US Treasury sells $70 billion of 5-year notes at 5.033%; after hot PMIs the 10-year yield hits 5.10%, its highest since 2007
- 424/09 · India's Sensex falls 1,247.71 points to 73,580; rupee presses against the 96 threshold as Brent tops $102 and the US 10-year yield exceeds 5.11%
- 524/09 · US Treasury sells 44 billion dollars of 7-year notes at 5.085%: highest yield since April 1993 as indirect demand falls to 57.2%
- 624/09 · No joint statement at Xi–Trump summit: tariff truce extended by just 2 months from 10 November to 10 January, no new decisions on chips or rare earths
- 725/09 · Michigan consumer sentiment at a 4-month low of 48.1, 1-year inflation expectations jump to 4.6%; US 30-year yield rises to 5.50%
- 827/09 · Bessent urges Fed flexibility on rates, citing AI productivity
- 928/09 · US ten-year Treasury yield climbs to a 19-year high
- 1029/09 · US long-dated yield holds above 5.5% despite Treasury buybacks
- 1130/09 · Softer US inflation erodes the odds of an October rate rise
- 1201/10 · US Treasuries pull back from their peak as two-year yield drops 10 basis points
- 1302/10 · Logan seeks 50 more basis points while most of the Fed waits
- 1405/10 · Nasdaq hits record as Treasury yields touch 24-year high
- 1506/10 · Fed's Schmid and Daly keep the door open to hikes despite high yields
- 1607/10 · Fed minutes point to one more rate rise before year-end
- 1707/10 · US ten-year auction clears at the highest yield in a quarter-century
- 1814/10 · US inflation climbs to 3.7%, putting an October hike back in play
- 1915/10 · US producer inflation jumps to 6.3%, yet Treasury yields fall