- The 10-year Treasury yield reached 5.23% on Friday, the highest since 2007, extending a move from just below 4.8% earlier in September as bond prices fell.
- Rate-hike odds repriced hard: Fed funds futures trading shows a 64% likelihood of an October hike, and University of Michigan year-ahead inflation expectations climbed to 4.6% in September from 4% in August.
- Macquarie's Thierry Wizman attributes the run-up primarily to bond supply rather than inflation: federal deficit financing plus an AI investment cycle estimated at $300 billion to $570 billion of related debt issuance this year.
- Equities have held up against the yield back-up: the S&P 500 sits near all-time highs, 2026 EPS estimates rose 6.1% between late June and August to $361.38, and the index trades at 21.3x forward earnings.
- Tactical positioning sits on the heaviest dealer level at 7,730 on the S&P 500 with the 10-year above 5.1% and crude settling at $94.61, leaving the overhead cluster as the level to watch.
Quotes
“I think this year it has more to do with the bond issuance than the inflation story”
“We don't have a Federal Reserve that's tightening aggressively, so a lot of things look pretty normal. The thing that's abnormal is that we're in the midst of a very strong investment cycle”
“So these yields could go higher”
“I remain bullish on SPY, but I’d rather use pullbacks to add exposure”