Bank of America Global Research previews tomorrow's September FOMC decision.

"The Fed is now widely expected to hike Wednesday by 25bps. Rates price this with ~85% likelihood, up from just 35% likelihood just 2 weeks ago. The sharp shift in Fed pricing was catalyzed by Warsh Jackson Hole (JH) speech + stronger labor & inflation data. It is the first part of a previously very out-of-consensus 75bps hike in '26 call from BofA US Economics," BofA notes.

"Fed faces simple choice at Sept FOMC: hike or risk large bond spike. If the Fed does not hike with current pricing, it risks a sharp and disorderly UST long end move. US 30Y could rapidly test 5.75%; UST buybacks would be futile to stop it. Bond price action, including post Friday's CPI, shows the bond likes orthodoxy  Orthodoxy = use rate hikes to slow inflation & quell long end rate spike (not buybacks)

Sept FOMC communications likely lean hawkish. SEP will show 50bps of total hikes in '26, Waller may dovish dissent. Big Q: which Warsh in presser? July FOMC or JH Warsh? We think JH, largely to support bond. If right, UST curve likely to twist flatten, USD to be supported, & risk challenged. If wrong, bigger Bessent "house" needed for bond," BofA adds.