A look at the day ahead in U.S. and global markets from Samuel Indyk.

The Federal Reserve is saying something and markets might finally be starting to listen.

Tuesday's plethora of Fed-speak echoed recent rumblings from the central bank. Interest rates are staying high and could go even higher.

Chicago Federal Reserve President Austan Goolsbee told Bloomberg on Tuesday that it was "too premature" to be discussing interest rate cuts. The New York Fed's John Williams noted inflation was still too high.

Loretta Mester, the President at the Cleveland Fed, said they're not at the point where rates can be kept on hold.

Markets are taking note.

The rate traders have priced for the Fed's December meeting stands at around 4.49%, up around 10 basis points from the day before, although still implying around 60 basis points of easing by year-end.

The chance of a rate cut as early as June has also disappeared, according to the pricing of interest rate futures, having stood at almost 20% a month ago.

Bond yields reacted in kind. The two-year yield is back above 4% and the 30-year yield hit its highest level since March 9, the day before problems emerged at U.S. tech-lender Silicon Valley Bank.

DEBT CEILING OPTIMISM

With just over two weeks until a possible U.S. debt default unless Congress votes to raise the debt ceiling past its $31.3 trillion limit, talks appear to be heading toward a positive outcome.

Negotiations between President Biden and top congressional Republican Kevin McCarthy did not end in a deal, but they edged closer to an agreement that would avoid an unthinkable U.S. debt default.

Biden said the leaders reached "an overwhelming consensus ... that defaulting on the debt is simply not an option. Our economy would fall into recession."

Biden, who will be travelling to Japan on Wednesday, is set to cut his trip short and skip stops in Australia and Papua New Guinea amid the debt ceiling stand-off.

Despite his cautious optimism, there is still skittishness in markets, with the yield on the 1-month T-bill trading close to its highest on record and the cost of insuring exposure to U.S. debt remaining elevated.

Elsewhere, the dollar has jumped to its strongest in six weeks and Wall Street futures are a little higher heading towards the open.

Key developments that should provide more direction to U.S. markets later on Wednesday:

* U.S. Building Permits and Housing Starts, MBA Mortgage Applications

* U.S. Treasury to auction 17-week bills, 20-year bonds

* Corporate earnings from Target, Cisco Systems

(Reporting by Samuel Indyk; Editing by Elaine Hardcastle)