US economic growth redefines bets on the Federal Reserve's next move

The third quarter closed with positive surprises in the North American economy, marking a GDP growth of 4.3%, the highest rate in the last twenty-four months. This robust reading of economic activity triggered an immediate revaluation in fixed income markets, initiating a reassessment of expectations regarding the monetary stance that the Federal Reserve will adopt in its upcoming decisions.

The movement in sovereign debt reflects new market dynamics

After the GDP figure was released, US debt yields experienced significant fluctuations throughout the session. The ten-year Treasury bond touched intraday highs near 4.165%, a level that contrasts with its earlier performance during the day when it showed corrections. These movements are not isolated: the spreads maintained by US debt compared to its international counterparts also demonstrate this dynamic. German bonds traded with a spread three basis points below the US level, while British debt showed a gap of two basis points for similar maturities.

Monetary policy: from accommodation to relative tightening

The most relevant aspect for market operators lies in how these data reshape expectations about the Federal Reserve’s course. After the GDP release, derivatives market bets shifted toward a more restrictive stance for the January meeting, reducing the probability of a rate cut as deep. While previous sessions considered a four basis point decrease, new estimates point to a reduction of just three basis points. This change in narrative underscores how solid economic data fuel prospects of greater caution by the US monetary authority.