Oct Fed hike probability collapsed from 70% to 20%; Dec still ~80%
The probability of an October rate hike has collapsed from 70% to 20% following "dovish-hike" comments from Fed Vice Chair Jefferson and NY Fed President Williams, both signaling a case for hike deferral. That's per Edward K. Tom at @Cboe as of October 5, 2026.
But the December hike probability remains around 80%. Fed Funds futures aren't pricing a moderation or reversal of the tightening bias. They're pricing a delay. Tom puts it plainly: any shift in Fed path policy is "more about the timing of the next rate hike, rather than a moderation or reversal of the tightening bias."
That distinction matters for reading the vol response. VIX closed at 15.3, correlation at 8.0, and skew at 7th percentile lows. Equity markets treated near-term hike repricing as relief. The forward policy path is still tight.
The cross-asset vol table shows where rate uncertainty is showing up. $TLT and $IEF 1M implied vols sit at the 98th percentile of their 1-year range. $RTY implied-realized spread is at the 89th percentile.
The rate vol signal is loud even as equity vol stayed contained.
The probability of an October rate hike has collapsed from 70% to 20% following "dovish-hike" comments from Fed Vice Chair Jefferson and NY Fed President Williams, both signaling a case for hike deferral. That's per Edward K. Tom at @Cboe as of October 5, 2026.
But the December hike probability remains around 80%. Fed Funds futures aren't pricing a moderation or reversal of the tightening bias. They're pricing a delay. Tom puts it plainly: any shift in Fed path policy is "more about the timing of the next rate hike, rather than a moderation or reversal of the tightening bias."
That distinction matters for reading the vol response. VIX closed at 15.3, correlation at 8.0, and skew at 7th percentile lows. Equity markets treated near-term hike repricing as relief. The forward policy path is still tight.
The cross-asset vol table shows where rate uncertainty is showing up. $TLT and $IEF 1M implied vols sit at the 98th percentile of their 1-year range. $RTY implied-realized spread is at the 89th percentile.
The rate vol signal is loud even as equity vol stayed contained.