### POV, The Fed rate hike probability for......>

FED: ### POV, The Fed rate hike probability for the September 25-26 FOMC meeting

remains largely a lock (98.5%) according to MNI's PINCH model, while the post

data Treasury sell-off this morning has shifted the chances of a fourth

quarterly hike at the December 18-19 FOMC from the low 70s to 77.8%. What has

really changed in the short term? Not much.

- Curves remain near 10+yr lows and nearing inversion. Whether that implies an

economic slowdown or even an outright recession at some point later in '19-early

'20 is debatable. SF Fed researchers wrote last month that "this time is

different" and that "correlation is not causation". But that's before factoring

in the effects of potential EM contagion (admin officials say this will have

limited effect on the US), and/or knock-on trade war effect if US slaps China

w/25% tariffs on $200B in goods (UBS econ's est. would spur 5% equity sell-off).

- Most option trade has been limited to better put buying on today's sell-off in

expirys through year-end and some limited early cycle buying for March 2019

hike. Positions are more pared off past Q1 2019 w/active accts more likely to

buy upside insurance if given the opportunity.