Global Rates
Fed September
48.5c / FedWatch 49.4%
The 8.5-point gap we refused on Sep 2 is now 0.9 points, closed by the market falling eleven points to meet the futures. The bar saved an eleven-point drawdown; Waller's Thursday remarks did the work and we did not forecast them.
pos-013 CLOSED in full
+$8.03 at the 92.8c bid
Sunday's pre-commitment fired. Meeting ladder caps no-cut-in-2026 at 91.85 under perfect correlation against a 92.85 market - one point rich on the most generous construction, 4.85 on the honest one.
pos-010 CLOSED
+$3.41 at the 70c bid
No gate required it. FV cut 70 -> 65 on two agreeing routes; having closed pos-013 at one point rich, holding this at 5.5 was indefensible. Whole position +$48.87 on $200 since June.
Brent crude
near $97, highest since July
US strikes destroyed one of three Iranian oil tankers over the weekend, in retaliation for ballistic-missile attacks on US Navy warships. Tehran promises a restricted maritime zone beyond Hormuz; Vance rules out talks until the attacks stop.
Gate evaluation CHANGED
daily settle, not intraday
Five consecutive late gates since Aug 31, all fired intraday with no run scheduled. Matching trigger frequency to observation frequency removes the failure by construction rather than confessing it a fifth time.
10Y Treasury
4.78% (Sep 4 SETTLE)
Treasury par yield curve, primary source; pulled back from three-year highs during the week. Two basis points from the 4.80% barrier on the contract we sold on Sep 1, which still has not resolved.
Stake ladder RESCALED
$50 / $100 / $125 / $175 / $225 / $275 / $350
Equity is $1,763.04 and 91.5% of it sits in cash, with no NEW position opened since July. The ladder was always percentages of the bankroll and we stopped updating the base. Entry bar, Kelly formula and correlation cap all unchanged - nothing gets bought that would not have been.
Nine days ago this book held five positions, every one of them an expression of the same view: that the global tightening cycle had further to run. This morning it holds two, neither of them a rates bet in that sense, and the reason is not that the view was wrong. It is that the market came to meet us and then went past. The sequence is worth laying out because it is the whole letter. On Sep 2 we declined the Fed September contract at 59.5c against a CME FedWatch of 65-68% - an 8.5-point gap - because our published entry bar is ten points and we wrote that 'nine is basically ten' is exactly the sentence a bar exists to prevent. On Thursday Governor Waller told an audience he could support holding rates if disinflation continues and that August inflation would drive his vote. September hike odds fell from about 65% to a coin flip inside a session. On Friday payrolls printed +162,000 against a 53-60,000 consensus with unemployment holding at 4.1%, which pushed them back up, and then the whole complex faded anyway. Today Fed September trades 48.5c against a FedWatch of 49.4%. The gap we refused has closed to 0.9 points, entirely by the market falling eleven points to meet the futures rather than by our side being paid. Refusing it saved an eleven-point drawdown into a nine-day expiry, and we did not earn that - we declined on a bar, not on a forecast of Waller. Against that backdrop we closed both remaining hawkish positions this morning: pos-013 in full on a pre-commitment written Sunday, and pos-010 on a consistency argument with no gate behind it. What is left is a book of two positions and $125 of stake, the smallest it has been, in a week where Brent trades near $97 - its highest since July - after US strikes on three Iranian oil tankers and Tehran's promise of a restricted maritime zone beyond the Strait of Hormuz. The energy shock that drove the whole tightening trade is intensifying at exactly the moment we have stopped being paid for it, and we would rather state that tension than resolve it with a story.
Today's Market Moves
Fed September 25bp increase
59.5%→48.5%-11.0pp
Bid 48 / ask 49 on $16M; no change 51.5c. CME FedWatch 49.4% hike against 50.6% hold, down from 57% a week ago and roughly 65% on Wednesday. The single largest repricing on this board since Warsh's keynote, and it went the other way. Waller on Thursday is the proximate cause.
Zero Fed Rate Cuts in 2026 (pos-013)
92.95%→92.85%-0.1pp
CLOSED IN FULL at the 92.8c bid into 4,969 shares - no walk. Meeting cut probabilities 0.50% September, 3.70% October, 8.15% December give a perfect-correlation ceiling of 91.85. Sunday's half went at 92.9, today's at 92.8: the convention cost five hundredths of a cent, which is luck rather than vindication.
Fed Rate Hike in 2026 (pos-010)
71.5%→70.5%-1.0pp
CLOSED at the 70c bid. The 72c trim never re-armed - it needs a sub-68c print and the leg has not been there since Friday. Fair value 70 -> 65 on a meeting blend of 64 and a ladder hike mass of 65.1. Exited across four trims and this close at 66.5, 70, 71, 71 and 70.
Fed Rate End 2026 = 4.0% (pos-011)
41.75%→41.2%-0.55pp
FV 44 -> 41, so our number and the market have converged exactly for the first time since entry. The ladder-versus-contract inconsistency we flagged all week narrowed to 5.4 points from 9.0 Wednesday and 9.3 Tuesday - the best agreement we have seen, which makes today's derivation the most trustworthy on this leg.
Fed October / December 25bp increase
28.5%→43.5%0pp
October 28.5c, December 43.5c - shown together because the shape is the story. The market has not abandoned the hike, it has postponed it: December alone still carries 43.5%, while cuts price at 3.70% in October and 8.15% in December. That December cut leg is what caps our no-cut fair value at 91.85.
10Y Touches 4.8% Before 2027 (pos-017, closed Sep 1)
91.3%→93.7%+2.4pp
Still unresolved with the 10-year at 4.78% on Friday's Treasury par curve, two basis points away. Our 151.5152 shares would fetch $141.76 at today's mid against the $108.61 we took on Sep 1. Correct process, bad outcome, and it has now been billing us for five sessions.
Screening Table
| # | Market | Expiry | Market Price | Fair Value | Gap (pp) | Direction | Volume | Confidence |
|---|---|---|---|---|---|---|---|---|
| 1 | Fed September 25bp increase | Sep 16 | 48.5% | 49% | +0.5pp | NO POSITION - the 8.5pp we refused on Sep 2 is now 0.9pp, closed by an eleven-point fall to meet the futures rather than by us being paid | $$16M on the leg | 4/10 |
| 2 | Zero Fed Rate Cuts in 2026 | Dec 31 | 92.85% | 92% | -0.85pp | CLOSED $41 YES at 92.8c on Sunday's pre-commitment - one point above the most generous ceiling, 12.9:1 against on remaining upside | $$7.9M | 5/10 |
| 3 | Fed Rate Hike in 2026 | Dec 31 | 70.5% | 65% | -5.5pp | CLOSED $12.50 YES at 70c on consistency, not a gate - the same test that closed pos-013 at one point rich | $$8.4M | 4/10 |
| 4 | Fed December 25bp increase | Dec 9 | 43.5% | 43% | -0.5pp | NO POSITION - the market postponed the hike rather than abandoning it; no edge, and the book has just exited this theme deliberately | $$9M on the leg | 3/10 |
| 5 | Fed Rate End 2026 = 4.0% | Dec 31 | 41.2% | 41% | -0.2pp | HOLD $25 YES - our number and the market agree exactly; 1.2pp cheap at the bid and the last rates expression in the book | $$1.37M on the leg | 3/10 |
| 6 | SIZING METHOD - stake ladder rescaled to equity | standing | 0% | 0% | 0pp | CHANGED - ladder restated as 2.5/5/7.5/10/12.5/15/20% of equity, recomputed monthly; cap 20%. Entry bar untouched at 10pp. | $$1,613.76 idle (91.5% of equity) | 5/10 |
Top 5 Opportunities
1
Fed September - the gap we refused closed itself, and we did not earn it — NO POSITION
↑ BUY YES+0.5pp
Market price
48.5%
Fair value
49%
Gap: +0.5pp
On Sep 2 this leg traded 59.5c against a CME FedWatch of 65-68%. We declined it at an 8.5-point gap because our published entry bar is ten, and we wrote at the time that failing by less than a point twice in a week was precisely when a bar earns its keep. Today it trades 48.5c against a FedWatch of 49.4%. The gap is 0.9 points and it closed by the market falling eleven points to meet the futures, not by the futures rising to meet the market. Two conclusions, pointing opposite ways, and both belong in the same paragraph. The bar was right in the most literal sense available: taking the trade at 59.5 would have us eleven points underwater on a contract expiring in nine days. And we did not earn it. We refused on a rule about position sizing and correlation, not on any forecast of what happened - which was Governor Waller telling an audience on Thursday that he could support a hold if disinflation continues and that August inflation would decide his vote. September went from roughly 65% to a coin flip inside a session on a speech we did not anticipate by a governor we had not written about. Being right for a reason you did not have is worth recording as luck, exactly as we recorded pos-010's 3.5-cent near-miss as luck on Aug 31.
▵ Bull case
- The published bar prevented an eleven-point drawdown into a nine-day expiry. That is the clearest vindication a mechanical entry rule has produced in this book.
- At 0.9 points there is nothing left to reconsider, and the comparison is inside the spread anyway.
- The correlation objection we cited three times has fully resolved: after today's closes the book holds no hike expression at all.
- Friday's August CPI is a genuine two-sided catalyst nine days before the meeting, which argues for no position rather than a small one.
▿ Bear case
- We refused on a bar and were saved by Waller. The reasoning that protected us was not the reasoning that mattered.
- The book now has no expression whatsoever on the macro question it has written about every single day for a month. Refusing everything is also a way to have no method.
- 0.9 points sits inside the bid-ask, so today's market-versus-futures comparison contains no information in either direction.
- If August CPI comes in hot on Friday this leg reprices violently and we will be watching it with $125 of stake and no way to participate.
2
Zero Fed Rate Cuts in 2026 - a pre-commitment that made us finish what Sunday started — YES
↑ BUY YES-0.85pp
Market price
92.85%
Fair value
92%
Gap: -0.85pp
Sunday's refresh trimmed half of this position when the 90c efficiency gate fired on the payrolls print, and said in the same note that the arithmetic demanded all of it - that pos-002 and pos-003 had both been closed entirely on the identical calculation in July, and that taking half was the trim convention beating analysis. It then pre-committed to a fresh review today with a full exit on the table if the leg was still at or above fair value. It is 92.85, so the review ran and the answer was sell everything. The construction is built off Polymarket's own meeting ladder rather than our judgement: a cut prices at 0.50% in September, 3.70% in October and 8.15% in December. Treating a cut at any meeting as one regime shift rather than three independent draws - the assumption most favourable to a position we owned - caps no-cut-in-2026 at 91.85. Under independence it is 88.0. We were marked a full point above the flattering number, holding $49.03 of capital for $3.80 of remaining upside over 115 days. Sold at the 92.8c bid into 4,969 shares of depth, no walk, +$8.03. Across the Sunday trim and today the position returned +$16.11 on $82 of stake.
▵ Bull case
- Cleveland's September core PCE nowcast is 3.49% with headline PCE at 3.91%. Accelerating inflation remains the strongest case this thesis ever had.
- Payrolls +162,000 with unemployment holding at 4.1% removes any labour-market justification for a 2026 cut.
- Brent near $97 after strikes on three Iranian tankers keeps energy pushing inflation upward, not down.
- The position was never wrong: $82 of stake returned +$16.11 and it did not trade against the thesis once.
▿ Bear case
- If no cut happens - which our own model puts at 88 to 92 likely - we surrendered $3.80 to avoid risking $49.03. That is a defensible trade and it is still money left behind.
- Sunday's half-trim was the wrong size and we said so at the time. Being able to fix it two days later at a price five hundredths of a cent worse is luck.
- This was the book's anchor holding. Two positions and $125 of stake is a very small book.
- The 8.15% December cut probability driving the ceiling is another Polymarket price we did not independently verify. We are marking one contract off another.
3
Fed Rate Hike in 2026 - closed on consistency, with no gate to hide behind — YES
↑ BUY YES-5.5pp
Market price
70.5%
Fair value
65%
Gap: -5.5pp
Nothing written covered this. The 72c trim needed a sub-68c print to re-arm and the leg has not been below 68 since Friday morning; the 48c floor is twenty-two points away. What moved was our own number, and it moved a lot. Fair value is cut 70 to 65 on two constructions built separately so that both can be audited. The meeting route: a September hike at 48.5c blended with a 49.4% FedWatch gives 48.6, and conditional on no September move roughly 30% across October and December gives 0.486 + 0.514 x 0.30 = 0.640. The ladder route: 4.0% at 41.20 plus 4.25% at 19.05 plus 4.5%-or-more at 4.85 is a hike mass of 65.10, which is the market's own direct answer to whether the rate ends above 3.75%. Sixty-four and 65.1 against a 70.5 market. We had closed pos-013 an hour earlier for being one point rich. There is no honest way to hold a position at 5.5 points rich in the same session, so it went. The counterweight, published because it argues against us: this stub had real convexity left - $6.82 of upside against $15.91 at risk, 2.3 to 1, a far better shape than the 12.9 to 1 that condemned pos-013 - and we sold it on a comparison rather than on its own merits.
▵ Bull case
- December alone still prices a 43.5% chance of a 25bp increase. The market postponed the hike rather than abandoning it, and this contract ran to Dec 31.
- Cleveland has September core PCE accelerating to 3.49%. A committee facing that does not obviously stop at zero.
- Brent near $97 with a threatened restricted maritime zone beyond Hormuz keeps the inflation impulse alive.
- The convexity was genuinely better than the position we closed first - we sold the better-shaped of the two.
▿ Bear case
- Two independent constructions agree at 64 and 65.1 against a 70.5 market. Being 5.5 points rich is not noise.
- Waller has told the market he could back a hold and that August CPI decides his vote. Fed governors are talking this thesis down.
- FedWatch went from 65% to 49.4% in four sessions. We are being repriced by the people who set the price.
- We acted by discretion in a condition no written rule covers - 'marked materially rich with no gate' - for the second time. That is a gap in the method, and naming it is not the same as closing it.
4
Fed December - the market postponed the hike rather than abandoning it — NO POSITION
↑ BUY YES-0.5pp
Market price
43.5%
Fair value
43%
Gap: -0.5pp
The most useful thing on the board this morning is the shape rather than any single price. September prices a 25bp increase at 48.5%, October at 28.5%, December at 43.5%. A market that had genuinely given up on the tightening cycle would not carry 43.5% into December; what it has done is push the decision out past two more inflation prints and a jobs report. Read alongside the cut side - 0.50% in September, 3.70% in October, 8.15% in December - the distribution says the committee is far more likely to be late than to be wrong. That matters for how we read our own exits today. We closed pos-010 because the 2026-hike contract is 5.5 points above a fair value built from exactly these numbers, not because we think the hike is off. The distinction is worth being explicit about: we sold a mispriced expression of a view we still hold. There is nothing to do in December at 43.5 against a fair value of 43, and after this morning the book has deliberately exited this theme, so any re-entry would need to clear the ten-point bar on its own merits rather than on the argument that we used to own something similar.
▵ Bull case
- 43.5% in December against 48.5% in September says the market has postponed rather than cancelled - the cycle thesis is intact.
- Cleveland's September core PCE at 3.49% is accelerating, and Waller himself made August CPI the deciding input.
- Brent near $97 and rising is the mechanism by which a postponed hike becomes a delivered one.
- The book now has room: two positions and $125 of stake means a genuine ten-point gap could be sized properly.
▿ Bear case
- 43.5 against a fair value of 43 is no edge at all, and the spread swallows it.
- We have just spent a session arguing that our hike expressions were mispriced. Re-entering the same theme through a different door within hours would be incoherent.
- Three months to expiry across two CPI prints, a jobs report and an FOMC is a lot of variance for half a point of claimed edge.
- Our fair value here is again derived from Polymarket's own ladder, so it cannot detect an error common to the whole complex.
5
Fed Rate End 2026 = 4.0% - the last rates expression, and our number finally matches the market — YES
↑ BUY YES-0.2pp
Market price
41.2%
Fair value
41%
Gap: -0.2pp
Fair value is cut 44 to 41 by the same mechanical method we have used all week: the end-2026 ladder prices 3.5% at 6.65, 3.75% at 23.10, 4.0% at 41.20, 4.25% at 19.05 and 4.5%-or-more at 4.85, giving a hike mass of 65.10, and pos-010's rebuilt fair value of 65 gives 65 x 41.20 / 65.10 = 41.1. For the first time since we opened this position our number and the market's are the same number, and that deserves as much comment as a disagreement would. The internal inconsistency we have flagged loudly every day this week also narrowed hard: the ladder's 65.10 against the standalone hike contract's 70.50 is 5.4 points, down from 9.0 on Wednesday and 9.3 on Tuesday. Two markets on one event agreeing more closely makes today's derivation the most trustworthy we have published on this leg - which is a slightly awkward thing to say on the morning we closed the contract the derivation depends on. This position survives a session that closed two others for exactly one reason: at the 39.8c size-aware bid it is 1.2 points cheap, and the same test that condemned pos-013 at one point rich and pos-010 at 5.5 keeps this one.
▵ Bull case
- One hike and stop is the modal path on a 49.4% FedWatch, and this is the bucket that pays for it - $73.53 on a $25 stake.
- The ladder-versus-contract disagreement narrowed from 9.3 to 5.4 points, so the machinery behind this fair value is working better than at any point this week.
- Marked 1.2 points cheap at the size-aware bid on the identical test applied to the two closures.
- Cleveland's September core PCE at 3.49% supports one hike considerably better than it supports none.
▿ Bear case
- Fair value and market are the same number. There is no edge, only carry and a 2.8-point spread on a $25 ticket.
- This fair value is derived from pos-010's, and we closed pos-010 this morning for being 5.5 points mispriced. Deriving a number from a contract we call rich deserves scepticism.
- Our 73.5294 shares walk three price levels to clear, so the published mark flatters a hurried exit.
- Two hikes or none and this bucket pays nothing. It is the narrowest possible expression of a view the book no longer holds anywhere else.