This week
written Oct 9, 2026 · updated weeklyHigh safe yields favor cash, TIPS and after-tax munis; expensive, narrow US stocks, long bonds and rate-sensitive assets stand to lose if rates keep rising.
4 things to know
Safe yields now beat what stocks are priced to return, and after tax, munis edge Treasuries in top brackets.
- Stocks' real extra return over TIPS is -0.47%: the 2.46% ten-year earnings yield is below the guaranteed 2.9% 10-year real yield (TIPS).
- Tax-free muni yield (national) of 3.40% matches about 5.4% taxable in the top federal bracket, edging the 5.3% 10-year Treasury; state funds add more.
- Caveat locking long yields risks price losses if rates rise further; a 30-year bond loses roughly 15% of its price per point of yield rise.
The Fed raised rates into a stalling job market, with an oil shock keeping inflation above its target.
- Fed's policy rate rose to 3.8% in September, the first hike since 2023, with inflation (PCE, yearly) at 3.7% against a 2% target.
- Total jobs (nonfarm payrolls) added just 29,000 in September; the quits rate at 1.9% says bargaining power sits with employers.
- Oil (WTI) at $92 is up 60.2% year-to-date on a supply shock; gasoline at $4.35 a gallon is up 54.9% year-to-date.
Rising long yields are repricing everything rate-sensitive at once: bonds, small stocks, property and mortgages.
- The 10-year Treasury yield at 5.3%, up 47 basis points (hundredths of a percent) in a month, is its highest since 2002.
- One month: broad bond fund -2.1%, US small companies -3.6%, real estate funds (REITs) -5.4%, 30-year mortgage rate up 57 basis points to 7.3%.
- Cash (3-month Treasury yield) pays 4.2% against 3.7% inflation: a real return while waiting, rare over the last twenty years.
Index gains sit in a few large tech companies while most stocks fall, and the calm fear gauge hides it.
- Tech-heavy stocks (Nasdaq-100) rose 5.9% in a month while US small companies fell 3.6%, mid-size 2.1% and developed-world ex-US 3.3%.
- An S&P 500 index fund is increasingly a bet on that handful of companies, not the broad economy.
- Market fear gauge (VIX) at 15.7 is calm, below its 10-year average of 18.7, despite the correction beneath the surface.
The Fed's first hike since 2023 and a bond rout push the 10-year Treasury yield to a 2002 high of 5.3%.
- The Fed raised its policy rate to 3.8% on September 16; the next decision is October 28, with hike odds swinging after the weak jobs report.
- Yield curve (10-year minus 2-year) at +0.5% is positive, but recessions have tended to arrive after the curve turns positive again, so it is not all-clear.
- Credit stress (high-yield spread) at 3.0% is calm but rose 36 basis points in a month: lenders charge little for risk, pricing no trouble.
- Tax-free muni yield (California) at 3.13% equals about 5.9% taxable for a top-bracket Californian, beating the 5.3% Treasury even with the 59% ratio historically rich.
Fed's policy rate
September 2026
3.8%
-47 bps
1Y
3-month Treasury yield (cash rate)
10/7/26
4.2%
+21 bps
1Y
10-year Treasury yield
10/7/26
5.3%
+115 bps
1Y
30-year Treasury yield
10/7/26
5.7%
+95 bps
1Y
Yield curve (10-year minus 2-year)
10/8/26
0.5%
-7 bps
1Y
Credit stress (high-yield spread)
10/7/26
3.1%
+25 bps
1Y
Broad bond fund (total US bond market)
10/8/26
$70.22
-1.5%
1Y
Tax-free muni yield (national)
10/8/26
3.39%
+27 bps
1Y
2-year Treasury yield
10/7/26
4.8%
+119 bps
1Y
5-year Treasury yield
10/7/26
5.0%
+131 bps
1Y
5-year real yield (TIPS)
10/7/26
2.7%
+133 bps
1Y
10-year real yield (TIPS)
10/7/26
2.9%
+114 bps
1Y
Inflation the market expects (10-year)
10/7/26
2.36%
+1 bps
1Y
Top-rated corporate bond yield (Aaa)
10/7/26
6.3%
+109 bps
1Y
Lower-rated corporate bond yield (Baa)
10/7/26
6.7%
+93 bps
1Y
Tax-free muni yield (California)
10/8/26
3.12%
+18 bps
1Y
Munis vs Treasuries (yield ratio)
10/8/26
59%
-1,189 bps
1Y
Tax-free muni yield (New York)
10/8/26
3.33%
+40 bps
1Y
What leveraged loans pay
10/8/26
6.40%
-95 bps
1Y
What AAA loan bundles pay
10/8/26
4.85%
-71 bps
1Y