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.
A few AI-linked giants carry the indexes while most stocks fall, and valuations leave no cushion over safe bonds.
- S&P 500 up 2.2% and Nasdaq-100 up 5.9% in a month on AI-related stocks; 83% of S&P members trade over 10% below their 52-week highs.
- Shiller CAPE (10-year P/E) at 40.6 versus a long-run average near 17; readings above 30 have preceded a decade of below-average returns.
- Earnings yield on 10-year profits at 2.46% sits below the 2.9% 10-year real yield (TIPS): stocks are priced to return less than safe bonds.
- Market fear gauge (VIX) at 15.7 is calm; insurance against a swing is cheap by the market's own pricing.
US stock market (S&P 500)
10/8/26
7,765
+15.3%
1Y
Tech-heavy stocks (Nasdaq-100)
10/8/26
30,726
+22.4%
1Y
Market fear gauge (VIX)
10/9/26
15.2
-29.7%
1Y
US mid-size companies
10/8/26
$73.0
+13.6%
1Y
US small companies
10/8/26
$137.3
+17.9%
1Y
Developed-world stocks (ex-US)
10/8/26
$69.9
+18.9%
1Y
Emerging-market stocks
10/8/26
$59.1
+10.9%
1Y
Shiller CAPE (10-year P/E)
September 2026
40.6
+5.2%
1Y
Earnings yield on 10-year profits (CAPE)
September 2026
2.46%
-13 bps
1Y
Stocks' real extra return over TIPS
September 2026
-0.47%
-126 bps
1Y
Private equity (listed funds)
10/8/26
$55.90
-14.1%
1Y
Corporate profits growth
Q2-2026
26.6%
+2,745 bps
1Y
Corporate profit margins
Q2-2026
13.1%
+211 bps
1Y
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
Headline inflation at 3.7% is mostly an oil story; core runs milder, and the bond market still trusts the 2% target.
- Inflation (PCE, yearly) at 3.7% versus core inflation at 3.2%: gasoline at $4.35, up 54.9% year-to-date, drives the gap.
- Producer prices (yearly) at 5.2% run above consumer prices at 3.7%, pointing to more price pressure ahead, not relief.
- Inflation the market expects (10-year) holds at 2.36%, flat on the month: the yield surge is real rates rising, not inflation fear.
- Caveat September CPI lands mid-October and could swing the Fed's October 28 decision either way.
Inflation (PCE, yearly)
August 2026
3.7%
+99 bps
1Y
Core inflation (ex food & energy)
August 2026
3.2%
+39 bps
1Y
Consumer prices (CPI, yearly)
August 2026
3.7%
+77 bps
1Y
Core consumer prices (CPI ex food & energy)
August 2026
2.8%
-35 bps
1Y
Rent inflation (yearly)
August 2026
3.0%
-44 bps
1Y
Gasoline price (regular, per gallon)
10/5/26
$4.35
+39.4%
1Y
Producer prices (yearly)
August 2026
5.2%
+253 bps
1Y
Core producer prices
August 2026
4.4%
+146 bps
1Y
Money supply (M2)
August 2026
$23,343B
+5.7%
1Y
Hiring nearly stalled in September even though layoffs stay rare: a low-firing, low-hiring job market.
- Total jobs (nonfarm payrolls) rose just 29,000 in September, well below forecasts; prior months were revised down a combined 60,000.
- Unemployment rate rose to 4.2%, partly from more people entering the labor force; jobless claims at 197,000 stay very low.
- Average hourly pay growth of 3.0% yearly is the slowest since May 2021 and trails 3.7% headline inflation: a real pay cut on average.
- Quits rate at 1.9% and job openings down 6.1% in a quarter say bargaining power for raises and job moves sits with employers.
Unemployment rate
September 2026
4.2%
-20 bps
1Y
Total jobs (nonfarm payrolls)
September 2026
159,044
+0.3%
1Y
Jobless claims (weekly)
10/3/26
197,000
-15.5%
1Y
Recession signal (Sahm rule)
September 2026
0.00
-100.0%
1Y
Job openings
August 2026
7,079
+2.3%
1Y
Quits rate
August 2026
1.9%
-10 bps
1Y
Average hourly pay
September 2026
$37.8
+3.0%
1Y
Business surveys run hot while households feel squeezed: solid growth with confidence at slump levels.
- Services activity (ISM PMI) at 55 and manufacturing at 54 both expand; a flash composite PMI of 58.4 was the strongest since July 2021.
- Consumer confidence at 52 is a level seen only in deep slumps; the household saving rate at 4.1% is well below the 7% norm.
- Economic growth (real GDP) at 2.2% for Q2 is normal but down 180 basis points from a year earlier.
- Fed minutes show unanimity on higher rates in September but say data since the meeting has changed the picture considerably.
Economic growth (real GDP)
Q2-2026
2.2%
-180 bps
1Y
Consumer confidence
August 2026
52
-11.2%
1Y
Retail sales
August 2026
$749,355M
+4.7%
1Y
Services activity (ISM PMI)
September 2026
55
+9.8%
1Y
Manufacturing activity (ISM PMI)
September 2026
54
+11.0%
1Y
Household saving rate
August 2026
4.1%
-110 bps
1Y
Financial conditions (Chicago Fed index)
10/2/26
-0.49
-5.5%
1Y
Mortgage rates at 7.3% and rising supply tilt power toward buyers, but financing costs more every month.
- 30-year mortgage rate up 57 basis points in a month to 7.3%, following the 10-year Treasury yield to 24-year highs.
- Homes for sale at 4.9 months of supply, up 28.9% year-to-date; above 6 months prices soften, below 4 they rise.
- US home prices (20 cities) up 2.5% in a year, below 3.0% pay growth: affordability improving slowly from a stretched base.
- Real estate funds (REITs) fell 5.4% in a month as yields spiked; REITs tend to lead house prices by about a year.
30-year mortgage rate
10/8/26
7.4%
+110 bps
1Y
US home prices (20 cities)
July 2026
346
+2.5%
1Y
Real estate funds (REITs)
10/8/26
$89.35
+3.9%
1Y
Homes started
August 2026
1,275
-1.2%
1Y
Building permits
August 2026
1,403
+4.2%
1Y
Homes for sale (months of supply)
August 2026
4.9
+6.5%
1Y
San Francisco home prices
July 2026
363
+3.5%
1Y
The dollar's 3.3% monthly rise trims what foreign holdings return in dollar terms.
- US dollar strength (index) at 102.39 broke above its 2026 highs as US yields rose past those of other economies.
- Euro down 3.9% and yen down 3.0% on the month; developed-world stocks (ex-US) fell 3.3% in dollars partly on the currency.
- Caveat the notes find no specific cause for euro and pound weakness this month; the yield gap is a mechanism, not a confirmed driver.
Oil's 60% year-to-date rise is a Middle East supply shock; gold falls because safe yields now pay more.
- Oil (WTI) at $92 pulled back 10.2% in a month from a mid-September peak, with Strait of Hormuz flows still constrained; the shock is not reversed.
- The EIA expects Brent near $90 through 2026, easing toward $74 in 2027 as production recovers: relief priced for next year, not this one.
- Gold at $4,146, down 5.9% in a month, as the stronger dollar and two-decade-high real yields raise the cost of holding a non-yielding asset.
- Broad commodities fund up 45.4% year-to-date, dominated by energy: the inflation-hedge trade is already well advanced.
Bitcoin rebounds alongside tech stocks this quarter but sits 31.8% below a year ago: a risk asset, not a hedge.
- Bitcoin at $83,038 rose 8.4% in a month and 31.4% in a quarter inside a down year; ethereum similar at -41.3% over a year.
- Both rose as the Nasdaq-100 rallied; moving with tech stocks undercuts the case for crypto as portfolio insurance.
- Caveat the research found no reliable reporting on what moved crypto this month; the figures stand without a cause.
Bond markets now name government debt supply as a driver of rising yields, and refinancing pushes interest costs higher.
- Federal debt at 123% of GDP with a -5.8% deficit; a weak 5-year auction in late September forced yields higher to clear.
- Interest on the federal debt at 3.2% of GDP predates this yield surge; each refinancing at 5%-plus yields raises it with a lag.
- Market commentary ties the selloff to heavy government and corporate debt supply, including a surge in data-center borrowing competing for investor dollars.
- Credit-card delinquencies at 2.9% and a household debt burden of 11.1% show households calm; the strain is in public, not private, balance sheets.