# 10-Year Yield Hits 5.27% With PCE and Payrolls Due - US Macro Recap - Week of September 29, 2026

> US Macro Recap for the week of September 29, 2026. Podcast synthesis on the 10-year Treasury yield hitting 5.27% as yields stop following oil, previews of core PCE and Friday's payrolls, diesel feeding into 44.4% of CPI items, Conning's CIO arguing for two more hikes and then patience, the reflation versus stall-speed debate, and positioning across the five-year, TIPS, gold and the dollar.

## US Macro Recap

### Week of September 29, 2026: 10-Year Yield Hits 5.27% With PCE and Payrolls Due

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*US Macro Recap, Tuesday, September 29, 2026*

Last Friday the story was simple: the economy ran hot and the 10-year Treasury yield broke through 5%. Over the weekend and into Monday it kept going. The 10-year touched 5.27%, the 30-year sat above 5.5%, and Brent crude went back to about $108 after the President rejected Iran's latest ceasefire offer. What's different this time is the argument. The question is no longer whether the Fed hikes again. It's how much damage the Fed is willing to cause to bring inflation down, and who ends up paying for it. Three reports this week will help answer that: job openings today, core PCE inflation on Wednesday, and payrolls on Friday.

## TL;DR

* *Rates kept rising, and oil no longer explains it.* The 10-year hit 5.22% on Thursday and 5.27% on Monday. The five-year Treasury auctioned at 5%, and the average yield across the whole Treasury curve is back above 5% for the first time since 2022. Oil actually fell late last week, yet yields kept climbing. The market now expects three to four more Fed hikes, and puts the odds of one in October at roughly 64% to 75%.
* *Wednesday's inflation report comes with a diesel problem attached.* Consensus for core PCE (the Fed's preferred inflation gauge, which strips out food and energy) is +0.3% for the month, which works out to about 3% a year. Nomura expects 3.3% year over year. The bigger worry is what comes next: one analysis finds diesel feeds into 44.4% of the items in the consumer price index, and the President says he is "seriously considering" a diesel export ban.
* *A new, more serious dovish voice has joined in: the buy side.* Conning's CIO, who oversees more than $190 billion, says the Fed should hike twice more (December and early 2027) and then stop. Her reason is that the job market is balanced, not overheating, when "we really don't need to hire much more than 50,000 or 75,000 people" a month. On the other side, Renaissance Macro's Neil Dutta says taming inflation "is going to probably require much higher interest rates than investors currently anticipate."

## What's new

*1. The bond selloff kept going, and it has moved past oil.* *(Mix: TV market commentator, a veteran rates trader, a pundit.)* On [Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOh6AWMuIREi3a98WSp09rLbB7BHjriCdIZRqHpSYcJ4h2Nu-2B0-2Be8pa01wrt4OBd9xmRj3OVMOC04bdXqarJSywFXB5m2u1sAWCZWp6ZOAtQRg-3D-3DsoQS_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3w6xrfE8AXq210XC7GwuTds-2BOIANR6YsxudLodHvmhhdweYvsA5msNwP4k10OF7mOyc3GWf8U-2FyaGXtNleTXew3Wx2S-2BtQTABxhM6srX9Xv-2BN0GG4bSIDuKSBYvEl8fTlsQvvXA5TwfGjyxwLNPJICU-3D) (September 25), CNBC's Mike Santoli said "the long bond hit five and a half last night and the 10 got to 522." He put the move down to "resilient growth, massive capex demand, and a Fed that has said they're not going to look through the headline inflation effects." Market pricing now points to "more than three further hikes by a year from now," which "would more than take back last year's 75 basis points of cuts." By Monday on [Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOit-2F0yYukfYakFyw5KuncJ5mAPPBB6h0F7-2FrOeflr1NeSFcKG9u78gHKOAgYYSDHXMxZPF-2B29IWUPL4klUzr-2FstngPOGOOmZ0rbtVg9jXYLdw-3D-3D1Ueu_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3yQLZr8qosn3ZvyRSKtKR6QEOfbrqIqfmJ9qrRDOUWFQu6g5yMXveqM0ziJHe7-2F-2B4JHVcE7umxs2PFpFM83SQNIjYKU65QqsNGnFhLiVFlVGDlp7n6zLvjDEV7Yjh4e9opkBIWgOJNMg9GVhpbKMyCA-3D) (September 28), the 10-year was "at session highs 527," and the Dow was down almost 400 points. The veteran trader known as DCP, on the floor since 1983, said on [Forward Guidance](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjp98HLo1lM2IwvP3naAKAhjF7rFCivTMWDhw7mq-2BPtk-2FYeXtTrTvEcJDRoEoyB3-2BCrMSIK5-2B3ZSUc6txglw8p6IBXnsl1nr-2BhFwJK84aAkMA-3D-3DnhsY_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3-2BvomAT8hqSaedxAv6ggkeANlR3Wmrb0OcFXG-2FWIYjfG5FjIjqGU7LIlVH54q8wrVWXpEJgI-2FdKyeoGTK516zWR-2FC6p321k7EH1qS-2BlcwWsKW-2F7teGwiPsAl-2FSXhBuhX1Txmvklj5dG3LenMxrSuLds-3D) (September 25) that the bond market can't turn until "the fed signal[s] hikes are done." His view is that it takes "a 6% 30 year and a five, five and a half front end" (two-year yields) to finally slow the AI spending boom. A pundit take from [The Peter Schiff Show](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhEJgWOCht2P9WrtXjuh2u9AtcFpNNyyDQeuHcT0kIUCCm9S0W0FCJWeKmqy7LJn4O5jiwf30dFfilVSNhTr9h9A5wyhywap1eUjkIDaMJahg-3D-3DluOg_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv37v8wYR3zFIFG8uxt3JpcCj6HGf01o3JjWp0x6wazdlx-2FZVB1NJW21XphQctW4mi1oYkG2V3cRv3J8QWCLT6B3Jd306xNuCjXfetd7AIxVdsy6BIj-2BR5d-2Bx2Y4OvuPunbpzYEQnz-2Bqr-2BxWLm2YZeu50-3D) (September 27) spelled out why this week felt different: oil dropped from about $100 to around $92, "but the interesting thing was yields on bonds kept rising." *Why it matters:* for most of the year, a simple rule worked: oil up, yields up. Now yields are rising on growth and Fed expectations alone, so a ceasefire might not bring them back down.

*2. Core PCE lands Wednesday, and forecasters expect it to stay hot.* *(Bank economists and strategists.)* On [RenMac Off-Script](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhaZdzT-2FQPoRwR-2BzxyzndM21WHXCydbc7OWosgFjY46VzrZgJHHOlh77eDpV5EMa0CVDLjjMAXhL5Ea7klMuLgJEQ2P1Dfdla4hJ-2BsxBqTuYw-3D-3DvZMw_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3yluSMONoITrbeUVV8j67HxWaFpQiB58OH5pEAKKqsi7tX10pQMn9IdCTTsUle2Kzs4G-2B5XDkpEKSKzraN0EvM8-2FsWn2NU-2Fp41G73GFTApexF-2BoB5epBm7gKGnlxykNZJIXAO5VpYVBKM-2B-2FXgM4WLzY-3D) (September 25), Renaissance Macro's team said consensus is "three tenths of a percent up on core PC[E] inflation," which "annualizes to something… close to three percent," and "that's well above the Fed's target." Their read: "resilient growth, firm inflation," which "keeps the pressure… on the Fed to keep hiking through the end of the year." They put the odds of a hike by the end of October at 64%. On [Nomura – The Week Ahead](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjU7J-2BYqb0xzAA9SfDsLP0rRZJGT1-2BLgRDbAQtWFBj1P1Gx3JPbsA3SjklaPXsHxhQKaLmnjoHSX18uBngcU4dwA8g41ONwHax6-2B5ahd0F-2F1A-3D-3DQ4OM_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv31eAkWUFiCjdh5Z8d2r0rEdfIHJgV2DqUG9vIjTYNpiMhuP6Vkw4GD-2BwY1378hX2YeW8fw8KePnxVr-2BGS01K90ploRdwrj0xnPf079SOJjGPVtjszH41VpwLDi6iaQWZfCyJsFAYT2yptFvlCEJ2BUg-3D) (September 25), Nomura's US economics team forecast core PCE up 0.28% for the month and 3.3% from a year ago. Annual data revisions should pull the year-end figure to about 3.2%, which fits their view of one more hike in December followed by a long pause. Two Fed officials are pushing the same message. NAB's Ray Attrill noted on [NAB Morning Call](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgwZF8jShPJgRxWxLT1TxwrHECZXkKnQj8Zu-2Bi-2FG1ZsEwaYP7GuKl2DxCwyDHdnBezzanyqbdg7jLjDHtGEamNb9ZV2oleK2SY4l-2Bt4euEz5Q-3D-3DuR5f_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv31WnRTSb4uUJPi6mviDz7wbpjBqu6aUor5XaB284idFrzYxmlRimybfVOLXf22qe9j-2BDrvU8PZB8MhOXog6VFirHV7e8-2F4S0JzGon-2FRQAmLIarERu3y9ed9hgDv4lnCbpsvalpjkhF9tpsTtUOTRTa0-3D) (September 27) that New York Fed President John Williams now says the Fed shouldn't "look through supply shocks even though it might be convenient to do so." And [The TreppWire Podcast](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgUCmripi52opyYJk9xCwg-2BQec-2Brlws9YFMWzgA0WDNkffT6qPX6h4itkDhMG-2BtyAyiEBVWSbZONqk-2BqQ9ey1Q3ujOH6U7igKlCgWPjToXYhw-3D-3DgCVf_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv37Z-2BIXimJ-2Fb6XHAVOqn7yLcDxUdAxW6SNA7naeESXte3ugn-2FbbYEE4bTVd-2BfbX4m9-2B-2BrFWioUyoJ9LBgeWzLm5p3gnir5IfEQI3iI53krAIBlNunj3eYC2NCazdRiLEK2wd5Dr1afQR0iyTdHPMpwbQ-3D) (September 25) noted that Richmond Fed President Tom Barkin "warned that inflation is spreading beyond energy and tariffs." *Why it matters:* a 0.3% monthly print keeps an October hike in play. A 0.2% print would be the first real break the doves have had in weeks.

*3. Diesel is working its way into everything, and the export ban is still under discussion.* *(Data journalist, farm-policy analyst, bank economist.)* The data journalist behind Data for the People made the most concrete case on [Excess Returns](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgOgWL7-2B9R8couf-2B5nUWl7jZHso-2Buhl-2Bd3wEn5gP7Sp76M0FSwNO6gStgGJdSAI02b4-2Fk6p3HU1574-2FvC06ngkq3mxjJDM0oLA5xZxrswFjtQ-3D-3D-9mN_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3-2FDqt3gq3lt1uoglfJONt40yr8jsW-2BqKh6OR8LFAyVWtQHVzHhO44E6tA-2FoEs6XZUOaGqNCNhjmscVKx7FAGd4xGOBaxGanh1RPi2IpspKjtDOfq8KmjHjOULx9kCdub2S-2F9NIl0-2FDoqcea6szKdMi4-3D) (September 26). He mapped every item in the consumer price index and found that "diesel percolates through 44.4 percent of all of the cpi items." Using trucking and rail fuel surcharges, he estimates that diesel at $7.84 for a full year "would have 0.65 percentage points impact on cpi" if retailers protect their margins, with grocery prices rising "between one and a half and two percent." His advice: watch Walmart, Target and Kroger earnings calls in October for talk about fuel surcharges, because "once walmart goes… people are going to follow." Morgan Stanley's Michael Gapen on [Bloomberg Surveillance](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjGKMwyZKAchWutLy-2BqE-2BtGwR1VhQ1PeK5-2FmdoNWtoRUoKIX51bM86P-2FB-2BgCklH2HBq0SExPxMaYYMosX5hIwyM3hDdWhyziOj-2B8Qs-2BMNqWNg-3D-3DX8Oe_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv32zCagzIcJz32k629T1Td0p4EqJxrbQVRBenMSTUAusR6TzVCT-2BNIpb-2FuUrc0-2Bn3Klci-2BOPUjvgw59e1EpiLpFXbfe13dMrkvUN2w2zW5sjLi-2BoSnLhoBGqpJLhqn9L33N0EopLm3NKkAzWj9049Uio-3D) (September 25) pointed to second-round effects (energy costs spreading into other prices) that are already showing up: "Airfares, for example, are up about 24% year on year." On the policy side, [Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiINUF6zgTbqcQ8UevPGlaoxf6aPXstX-2FeKNpFj1gAiKfrPr7I2wBad-2BSs0h-2FaiqxKeSvQOhuWK4E7cs78XIgNCJwJU7uM5y7oRk3zDaWOqMQ-3D-3DAAhb_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3w4mTrHuR9TbvHvJubn73K9fZYArfoY58UryiRqnOYV-2BmfaAxL5J-2FefYeTIorupXHe2mle8tls1-2FTgJraHC2nUzstEprPV7P1hAxxloC4dshMFpbstJESYO4fqMnhAQFGxLnyMI-2F0vlfEM-2BhUk-2BJySU-3D) (September 28) reported the President "says he's, quote, seriously considering that diesel export ban," with Brent above $106. Farm-policy analyst Jim Wiesemeyer on [AG Bull](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgN9RN6J-2FDZ1KEYIIk-2FUXr1JXNdJKBgso4rvR7SYF-2F8K41jWh1hv72YStfB51PFN3ql046SUjmVXez0hHUAM-2BMvghS9d-2F1-2BoxzpmT8fAnrG1g-3D-3DOiQy_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3y7C6Gy2qyv7w4NNwYTuv53aJvYhtkW-2BI6-2BeklDhaKUJ8vyE4i5bmPoCnDs4k8-2BQvJcKuUougoZ4BN3NMdviDXd0WJFkhPsVZXNEF8q6BKpB4PJFJ2WwQrxo-2FzJ-2BqeX02WEOesneH5uMNxEFNOvmBFE-3D) (September 28) described it as "an etch-a-sketch energy policy." Trump first backed a ban, then Energy Secretary Chris Wright "pooh-poohed it." Meanwhile, the administration's internal polls show "very negative reaction" in the Farm Belt to diesel prices. *Why it matters:* energy is supposed to be the part of inflation the Fed can ignore. When it shows up in freight, groceries and airfares, it becomes part of core inflation, which the Fed can't ignore.

*4. A $190 billion CIO says hike twice, then be patient.* *(Operator: buy-side CIO.)* On [Credit Exchange with Lisa Lee](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhMLqvsP3O-2F0vxY0wtmCp6VTPjCwXc-2F9ck2TFQAJAkqtC80iqgssefCa9iF43-2BCmceOzN7GhuM80e5w6Y1ctDCck3FwvVdOFD4FcuoyCq1hwA-3D-3Dlsbc_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv31lCXE8UrhlkDegEQHJndPA2jbO0xNv6DGZG7ZYispOK1k6uVJuBROq5b9-2FYoiQEr2G8mOCZB3d6yKvh1xrm-2BgRWtBEkArcP-2BDkwlzG0MLY4rsg2H24-2Bv-2BH1EeMyhwOUCxEE-2BKsoRo7-2FwDyo5S365YA-3D) (September 25), Conning North America CIO Cindy Boyu called the current hikes "really taking back some of the cuts that they gave to the markets in 2025 that they did not need to." She agrees with Chair Warsh on the facts, quoting his Jackson Hole numbers: before COVID, 32% of core PCE components were rising faster than 3%; at the peak it was 77%; "today we sit with 54%," and there have been "66 months and counting" above target. But she thinks he is pushing too hard: "25 was perfectly fine… we're not seeing that spiraling of inflation." Her plan is to "stay out of the way in October," hike in December and again in the first quarter of 2027, and stop there, calling it "more of a policy adjustment than a rate hiking cycle." *Why it matters:* last week the "don't overdo it" argument came from a former Fed president. This week it came from a large investor who manages insurance-company money and would take losses if rates kept climbing.

*5. The labor market is balanced, and immigration is the reason job gains look small.* *(Operator CIO, data journalist, rates trader.)* Boyu gave the clearest estimate of the break-even pace of hiring this week (the monthly job gains needed to keep unemployment steady). "We do not have a significant supply of workers domestically… and we have little to no immigration. So we are at that equilibrium where we really don't need to hire much more than 50,000 or 75,000 people each period. And that's exactly what we've seen when you smooth the data out." She sees that as good news, because it means no "wage-price spiral" (wages and prices pushing each other up). On [Excess Returns](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgOgWL7-2B9R8couf-2B5nUWl7jZHso-2Buhl-2Bd3wEn5gP7Sp76M0FSwNO6gStgGJdSAI02b4-2Fk6p3HU1574-2FvC06ngkq3mxjJDM0oLA5xZxrswFjtQ-3D-3D9Irr_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3y7YWDdpNgXA2ES0y3dx5kgFf1t-2B99li-2FCpuznkrjZWVVlAcoY25SUJcTBw4WP1WLRRm0yMEcggyrE5NI4mMZRxaDAV-2BrlSYK1E-2FWGd2upg9liisbN-2FR3Y2vfyxusms9pCHiOhqEB6-2FPSeA-2FOsg-2FOKk-3D), the data journalist tested the idea that native-born workers would fill jobs left by departing immigrant workers. If that were happening, he said, native-born men's labor force participation (the share working or looking for work) should have risen since 2025. "They're not… the data does not support this." He called it "very concerning for structural service inflation which nobody is talking about." DCP on [Forward Guidance](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjp98HLo1lM2IwvP3naAKAhjF7rFCivTMWDhw7mq-2BPtk-2FYeXtTrTvEcJDRoEoyB3-2BCrMSIK5-2B3ZSUc6txglw8p6IBXnsl1nr-2BhFwJK84aAkMA-3D-3Dr-37_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv33KiLot9PGacsG1oT4xDEQBilM4FMwGN4Jxhc6dmBwwR2SJUfMTAS7ULfHwaUhZeIkRrBOPr-2BDUw7nkg74bqrmB7HJHB5jWDSalVvoxARHnZdt4FXLlwpm-2BRjab3ZZtPNV1QumyLM5wITLX0NYf9kYw-3D) added that with fewer workers available, employers are "holding on to their employees as long as they possibly can." *Why it matters:* if Friday's payroll number is small, that doesn't mean the job market is weak. With the workforce shrinking, 50,000 to 75,000 jobs a month is roughly the steady-state pace.

## The debate

Both camps showed up this week, so both get built out. The data still leans hawkish. But the "don't overdo it" camp is getting more credible voices.

*Camp A: Reflation. The Fed has to break something, and it hasn't yet.* *(Macro strategists, a rates strategist, a macro research firm.)* The sharpest version came from Neil Dutta of Renaissance Macro on [Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOit-2F0yYukfYakFyw5KuncJ5mAPPBB6h0F7-2FrOeflr1NeSFcKG9u78gHKOAgYYSDHXMxZPF-2B29IWUPL4klUzr-2FstngPOGOOmZ0rbtVg9jXYLdw-3D-3DyhLy_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3-2BPWuKZYtHeErPexlqj26u0kuhRKuYcqOxUNmuv0rbldPl2tWHvy2NHjTRVe59SMOm1a5ApCEI3kx9zPD95iu3M9tEawigkmsf7OimayXKb0bMEYRdVjTPAaH7Nl7WKakr8WFMRsQ37nEV149sato4c-3D) (September 28). The weak, rate-sensitive parts of the economy "are already quite depressed. So depressing them more is going to have how much of an effect on growth?" Meanwhile, "information processing equipment tech is doing really well," which keeps growth and stocks up. "So if the Fed is having a financial conditions framework, breaking the equity market ultimately means having to break this part of the economy. And so that's going to probably require much higher interest rates than investors currently anticipate." He dismissed the deficit story ("I don't really see much there there") and sees yields rising "because monetary policy is tightening and global growth is resilient." His answer: "weaker demand… is the solution to bring inflation to the Fed's target, which we're still way above." Bank of America rates strategist Megan Swiber on [WSJ's Take On the Week](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhg3RcTiR3xz5R481WQpSa-2Fn5hB0x0-2FhCEEEu5RIXToMqAqnwkeBptLqyBeSOzkhGQEZ4rEpP6Rs-2BVo5zjxTFOlH4wPNpcL3632N-2BSCmpE82w-3D-3DT58b_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3-2BqnY-2BgaYWYHdQuMyF4VpXh7Cfidx2msfGyygjOJN3Q9VvrVjVKJ1NwKs2rMLFbzd-2B7zoJsjdREA2pSrlnSWx49OTG-2BUshR9JTuqfV72k8ittMOb7MIyyjWlGrsWcFANuJGc-2FszzZEpeJ9Jpm4igX0s-3D) (September 27) noticed that Warsh described the September hike as "removing policy accommodation rather than restricting policy." She thinks "there's more room for the curve to flatten," with short-term yields catching up to long-term ones, and "likely some correction in equities." Darius Dale of 42 Macro, on [Bloomberg Surveillance](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjGKMwyZKAchWutLy-2BqE-2BtGwR1VhQ1PeK5-2FmdoNWtoRUoKIX51bM86P-2FB-2BgCklH2HBq0SExPxMaYYMosX5hIwyM3hDdWhyziOj-2B8Qs-2BMNqWNg-3D-3DDJRC_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3xB2d2lF0w6aqqxBl1314x2UuJ6U5NDnBtwCWxAKnR2nR-2FxYoL7jFaoY96Uhs5kE2vxMDBbF2fjuVhs29e6B3Iu7GFw-2F9I47lQdPNCZVuG9MGWkGwWVLdekhfetxikdH-2Ftw0iQJvY2EUfydzIRx3Axk-3D) (September 25), said his models put fair value for the 10-year around 6%. His view is that either the Fed hikes "two to three more times" or Washington caps yields through Treasury buybacks, bank deregulation or even "yield curve control" (the Fed buying bonds to hold yields at a target).

*Camp B: Stall speed. The damage is coming, and the Fed will overshoot.* *(An operator CIO, a bank analyst, a strategist, a mortgage-policy veteran.)* Boyu ([Credit Exchange](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhMLqvsP3O-2F0vxY0wtmCp6VTPjCwXc-2F9ck2TFQAJAkqtC80iqgssefCa9iF43-2BCmceOzN7GhuM80e5w6Y1ctDCck3FwvVdOFD4FcuoyCq1hwA-3D-3DKPp1_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv36Ycv9S5Ke97Z2zL5knLCeEXZdg78ft686xz8LtezU5ND6IuZS5BDOP2nxc0i2-2Bm7tz5F-2FU-2BETI6dcDTTIQ4K8AaRlCTKkGKZcrvjfkU2AcZbaHSYRBuY4x6-2F6U9GxvUjdw1TuGPS5kughBq5PGtlxE-3D)) gives the mild version: "Don't overreact because overreaction could stifle the economy… and actually cause a recession." Chris Whalen of Whalen Global Advisors on [The Julia La Roche Show](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOitBKMkelVTAV2cQOEgOWfZgX8kZI84HqKIg8AftR-2FkYNbfhVpYd3OQhh-2FxKtdA6pNAfAO1M7ndRNXxenz-2FdJaZkXqOeuLE-2BG4X9cHhONuN3A-3D-3DBWWH_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv37yg8ecneRgR0BQwAIVf2FPMgxMvzY37rDEdsJJrHZJfCBRJIsEjkgufmAKXzFrQSDeZZoc21-2FXkWgSUhNW8z7tgwpM3qczqCXl-2BtIXxcW8c-2FmSwY9Y-2Baem9aXAVdV06Um1NeNJPki7dOsnXEyFzWuM-3D) (September 26) goes further: "If we start seeing significant demand destruction in this country, and I think that's a possibility end of this year going into 2027, then you're going to see the Fed cutting interest rates." He adds that "when you're running a deficit of $2 trillion, talking about getting back to the 2% inflation target is kind of silly." Strategist Liz Thomas on [RiskReversal Pod](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjUqJcVogh6v3G4gmXG-2BeJBC2IRBsx68X4ucmsW3R8yyNcsK5BZ7iqOEEJpx3jpLPwceQNll128QaJdCDXFdpKaG3wWT6v-2FENksLBUNQ9ukLQ-3D-3DDcxt_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv30MhjGeUfntIw2yt8mCqZdgip-2Fig2CO4hbJLGoi-2BcO22SNUd1qEYiMGHaPvrt9QzNS2ad-2BKYxubjg-2F208wrN4XfvPAPvPCoKGlQND631MRQBY96ugtyHPxNI4-2BXygnmc5n7PEHUlRk16onIea2lFzm0-3D) (September 28) warns that "if oil prices stay elevated, that means the Fed's going to keep hiking, full stop. I think that's a very quick way to have a recession… a spike in oil prices usually precedes a recession." The risk after that, she says, is the Fed losing credibility because "they didn't really have to hike in the first place." On [Chrisman Commentary](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjbTs6CBTFtyW1VYlhwDQDel6fNa-2FUHjK01txRcDBUCplGcGHOrNpstZJGtDFiJHCsIEZw3Ys9AgVyctQ1OYTpoShx7Om7pt76ebwthyWIddw-3D-3Dt07O_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3-2FJqXEciPwe60WHqd-2FdStmOTvWSAFX-2FkGCveuiQ9ScezLf7FIJsszp-2BtP2DCnxztCdetyQoPi8NwQcSaqJOG-2FGiT03okmiPABIqXOKym9DGNYSXWTjXLInoTO8uyzMiR6U7Ss6yX7XGty4XMHTYd5G8-3D) (September 28), host Robbie Chrisman laid out the supply-side argument. Inflation is being driven "less by excess domestic demand and more by temporary supply-side forces" (tariffs, energy and food shocks, the AI build-out) "while wage growth is slowing." If so, more hikes "would do little to address the underlying inflation drivers, while increasing damage to interest-rate-sensitive parts of the economy." Morgan Stanley's Gapen ([Bloomberg Surveillance](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjGKMwyZKAchWutLy-2BqE-2BtGwR1VhQ1PeK5-2FmdoNWtoRUoKIX51bM86P-2FB-2BgCklH2HBq0SExPxMaYYMosX5hIwyM3hDdWhyziOj-2B8Qs-2BMNqWNg-3D-3Dk7Wh_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv37R6OeYFIiBIXfOjcfj9kJHJhreC2-2F7bxJjFxilXsIACeUBoAF2cC9bKV8hSn7uL-2FR-2BgzhQvHxQ3-2F-2FRPLKTeoyTbCJy52wtAfUVQja5QTv3muxF-2Bsv2RsE3GVKlXNhGZJL-2B5K36WYU95YmeXPfJJl3g-3D)) connects the two camps: "It's very unlikely higher yields will slow down the rate of hyperscaler spending and borrowing… So the Fed will be forced to essentially slow down the parts of the economy that are already slow."

*The honest read:* the two camps agree on the mechanics and disagree on whether it's worth it. Both say the Fed's tool barely touches AI spending and hits housing, small businesses and lower-income households hard. Dutta thinks that's the price of getting inflation down. Boyu, Whalen and Thomas think it's how the Fed ends up cutting in 2027. Wednesday's core PCE and Friday's payrolls are the next evidence either side gets.

## The trades in play

*Operators putting real money to work:*

* *Swap long bonds for the five-year (portfolio manager on Thoughtful Money).* On [Thoughtful Money with Adam Taggart](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjd3DOu4VOQ9BEAF1-2F3hiQHk7-2FOMeGLGq98hPldYq6HobI3G40EAzVV74jdnEB9DGUYRMdXMkM3b2w1WMYgJl208Q04gkIqwqA2bvvRRuVATg-3D-3De5Mt_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3-2F5f9l6YgBHDogQK-2Fu60STzYP0gmEGBb4nauU9N6L22hL2xnB3hF9lGdXzbGrgoTmwl2-2FRT9oEb3-2Bbzaa9kEAYTkOQvNVGpH2T3kqkfTAd-2FioYLHtkHRZsDQXsFmZqsYtTDcs6bEdL-2FcD-2FJ7HJJDkFA-3D) (September 26), the portfolio-manager guest said "one of our trades this week was that we sold a little bit of our longer bond position. We bought the five-year… The newly auctioned five-year at 5%." His logic: in the worst case you hold it to maturity and "earn close to 5%." He watches real yields (yields after subtracting expected inflation): the five-year breakeven inflation rate, taken from TIPS (inflation-protected Treasuries), is about 2.30%, so the real five-year yield is about 2.70%, which he calls "decently restrictive" for "mortgages, car loans, corporate loans, pretty much all loans."
* *Hedge funds are positioned for more hikes (Goldman Sachs).* Tony Kim, Goldman's global head of hedge fund coverage, said on [The Markets](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiFhygN4yTOfw-2B2oNPPC5YXYiLaYU33TA4ImPMs4euFvTfuGt9i83UOgACDg-2BsaFWiZjaaf0Qqtk3PQM9jjQ2EK3rIzvVMoSHi44UUL5Xovfg-3D-3DPKzG_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3zYMmipFT5-2F4LY4gZmGVyStyXq8Ibp6243bhOOnHUTjyiKr9JyrSBXC4ZzAZuetyxgG0eAMXO3MjJytQAOUR3OwnRAINjnb-2FJH0ck0xw7Nyf96Dc7s9Ps4laXgeAK5c4SCZRrduy0qCawFNOSs0IuPY-3D) (recorded September 23, released September 25) that clients are "lower on the risk-taking scale," with "paid rates positions in the bond market" (bets that rates rise), a "bias towards flatter curves," and "on the margin long dollars." He called the bond market the "number one kind of clear and present danger for the stock market." His favorite equity idea is Japan, favoring the broad TOPIX index over the Nikkei, as an AI, re-industrialization and defense play.
* *Out of mortgage REITs and banks, into energy (Chris Whalen).* On [The Julia La Roche Show](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOitBKMkelVTAV2cQOEgOWfZgX8kZI84HqKIg8AftR-2FkYNbfhVpYd3OQhh-2FxKtdA6pNAfAO1M7ndRNXxenz-2FdJaZkXqOeuLE-2BG4X9cHhONuN3A-3D-3DlBTT_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv332AH-2By2o1P3K94uWZf6OOb80IR421gbLJL78yOjZKw8lqr2lNz5fLQ3L2vSd0ru0CmHW4OwNzK-2BgHnw9fdNEaQHATGtry5yc3Ljikd-2F6sgHUKclGGLAaz-2Beq80nbGiFtNnlNvoMp98o07xQLJhANOU-3D), Whalen said he has "liquidated about a third of my positions." Annaly fell from 16% of his portfolio to 11%, and he sold SpaceX and Schwab ("Banks are going nowhere this year"). The money went into "energy stocks, looking at some of the drillers… the majors," because "energy is going to be doing pretty well."
* *Long the 10-year and long gold (Liz Thomas).* On [RiskReversal Pod](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjUqJcVogh6v3G4gmXG-2BeJBC2IRBsx68X4ucmsW3R8yyNcsK5BZ7iqOEEJpx3jpLPwceQNll128QaJdCDXFdpKaG3wWT6v-2FENksLBUNQ9ukLQ-3D-3DHUrW_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3ytzUbmoTuXXBaBBPNDO1yRfPRBioaqksapI8w0sx7DYB34huj7D0MvByTsMj0iGRbYtAMC0NAmxLaCOy9b8D23-2FACXbMspYDyTu-2B1xXYc2omgjQZWnsBXOFf46qK-2BG-2B5B4JxLitWWvPOjy9PSH5Ci8-3D), Thomas said she "started talking about buying the 10-year Treasury above 480" and "initiated a position" in gold a few weeks ago. She holds gold as a hedge against uncertainty, not a bet on yields: "People are going to buy gold… because yields are making the geopolitical environment… a little spooky."

*Strategist and commentator views on instruments:*

* *TIPS near 3% start to look attractive (DCP).* On [Forward Guidance](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjp98HLo1lM2IwvP3naAKAhjF7rFCivTMWDhw7mq-2BPtk-2FYeXtTrTvEcJDRoEoyB3-2BCrMSIK5-2B3ZSUc6txglw8p6IBXnsl1nr-2BhFwJK84aAkMA-3D-3DeHu1_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv374qV0cuMgSfMYcYue8bYY-2BLiORrbVxPMhFkZEJmcVaaYA9xBFGR1sRpfh0p-2FcOmCxVnCTtfSmx0Piz9Fz2a15mZYNGnyJrB7QzVr-2BcuTFHRV3EA6gFV1Bsktd9NMF-2Fh19WQXwliev2MyEtdB-2BT3ml4-3D), DCP put TIPS real yields at "two, eight, three, two, eight, four right about now… not that far away from a three." He'd "throw a couple mil" at a 30-year above 6% or a 10-year at 5.5%: "it's risk-free."
* *Stay with quality stocks and avoid rate-sensitive sectors (Schwab).* Schwab's Liz Ann Sonders on [Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOit-2F0yYukfYakFyw5KuncJ5mAPPBB6h0F7-2FrOeflr1NeSFcKG9u78gHKOAgYYSDHXMxZPF-2B29IWUPL4klUzr-2FstngPOGOOmZ0rbtVg9jXYLdw-3D-3DFSrz_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3zY7ROa3cQb7VfKwdnKfuCvXwsQHCRUWtwmV4tD17jiZM6W2jqNXH5v6XDV2ynt3Hl48kmONKTs5-2B3OlE25eJEiFrcDbHfCd7ygRJJJTY4UKyUY7mdLYdV2QV0TQUHb3EaL1taP-2FGX8bbWnP6fYBPtA-3D) recommended companies with "high interest coverage" (plenty of profit to cover interest payments). "Utilities and REITs and financials" are the ones getting hurt. Under the surface it's already painful: Santoli ([Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOh6AWMuIREi3a98WSp09rLbB7BHjriCdIZRqHpSYcJ4h2Nu-2B0-2Be8pa01wrt4OBd9xmRj3OVMOC04bdXqarJSywFXB5m2u1sAWCZWp6ZOAtQRg-3D-3DweO6_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3-2B-2BCtzvP8LAR5cpQPhqcV0nDZOuoHQP3-2BYLm4-2B9aXhsNgVKjUeLrVNPGpptEiVme7YqOnj05jkOPQ7lJwVJ6WmUmHL9qkEffAYgMzny1CMdOs2YVhTJXVXi3msivYFFW5thsOPtZoCvMkjkuEx9woJ4-3D)) noted the median S&P 500 stock was down 5% for the month, and 17% below its high, while the index was up about a quarter of a percent.
* *Still positive on the dollar (J.P. Morgan).* J.P. Morgan's FX strategists on [At Any Rate](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhYNPzchQ8gcbQOancEl7SaLjANAEdSmfJaWTe7nLCqiA4PwtGDQYOpCVWPMP-2Fjs15DZ4NrQ3RV81rwc5hstU-2FtFHGPPWqY8FytCq6sEk1pag-3D-3DS-P1_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv39fQy9bgRgKsGQDt57dLT2Ic-2BnwhYrooRcuK2hOtiEu1Bbnx8wOAibyYNRP4awrRFvF3WWgQ0hBJ1pmd3nlr5jDEj0QO6-2FypeGTITIb25192bIQL7k6fgyFBc23PoASEbE4W7cjIc6GJZlzAezfROMI-3D) (September 25) said "all systems firing on the inflation side" justified the dollar's rise, and "we're certainly still constructive on the dollar right here, right now." A strong payrolls number could push it further. Within G10 currencies they like the Norwegian krone as a new high-yielder and expect the Swiss franc to lag.
* *The dollar squeeze abroad (Jeff Snider).* On [Eurodollar University](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOja-2Fx7B2pYsUcAcUH8qdaaJmq-2FV6yWwJGVygLcZjhuANyox9F01lJnhoR-2Fr9wTjKZkLFHviSaTfLNyyyfoskyMItoWqUj51hhCD4HbSRb7xmA-3D-3DKKzz_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv36A6ZIjGKHc8nJTXEITovIncEHicr4eHdirF0Rs-2FvHWqAxpLPgqvs8oXW4YtSXDgBVp0-2B40SZvH5TSGwPkc1vEHN-2BqJc6KYy-2FN1xeqvFHIpf9KIXUYrpv9YBlVpPYQZZn3FezNgJPspAuP-2F9PjudBL4-3D) (September 26), Snider pointed to India. Its central bank ran at least $10 billion of currency swaps to defend the rupee and has built up an estimated "$106.7 billion short dollar forward position" (promises to deliver dollars in the future). His explanation: expensive oil means importers need more dollars just when dollar funding gets tight. The dollar index is back above 101.

## Read-throughs

* *Credit markets are starting to split.* On [Saxo Market Call](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOi3VpkiOZuyt7fMRO3dWkDt5rslqcgquuATpt50AG6soy-2Bnji6IQ5HqNR1EwDQv70E-2Fvk2WowC-2FOhD3LN4km8iA6uUMe8-2BG8npCOtLGRtHb9A-3D-3DMo9H_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv31-2FRGAal22Yi0xT-2BzXZ2DX-2FyipoihlL2mfTEAtPc9CgyAo-2FTdLXDWxVXzSxnvMovX9x5c7Jaki9CAdPLGRuDTBI7-2FJVyOaVMeFxLc-2FBLAanKlWx4Be98f05VXuY6dGjFoMfcXxKpTNvqNqNcsgqJH84-3D) (September 28), Saxo's John Hardy said US junk bond spreads (the extra yield investors demand over Treasuries) widened another 12 basis points to 294. That's still below the 335 peak after the Iran war began in March. RenMac ([RenMac Off-Script](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhaZdzT-2FQPoRwR-2BzxyzndM21WHXCydbc7OWosgFjY46VzrZgJHHOlh77eDpV5EMa0CVDLjjMAXhL5Ea7klMuLgJEQ2P1Dfdla4hJ-2BsxBqTuYw-3D-3DADVc_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv33p6wSMXOAcf36ykDNIOyhUiawcdV9WSeBWy-2FJ9eOyYTESD2Y2sgdoMADvWIygETzacCG2JmOTTMwTCs4WcQJcdllWXMjBn6nEAWlFXWZz3q7iiNLLy-2FvxRGCiwSglLr6xjjRlyZaWvoT5U5lXqPa60-3D)) found the stress concentrated at the very bottom: over the past month, "a 40 basis point increase in triple C credits" (the riskiest junk bonds), while single-B and double-B spreads actually tightened. On [Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOit-2F0yYukfYakFyw5KuncJ5mAPPBB6h0F7-2FrOeflr1NeSFcKG9u78gHKOAgYYSDHXMxZPF-2B29IWUPL4klUzr-2FstngPOGOOmZ0rbtVg9jXYLdw-3D-3DMvq3_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3zn2v8DZczGrA-2BfaNLiNdz4F-2B5OTah0ChLcqDJkN5XwkBG-2BNnHiI1ImtAPc6QSy5ljkhGQWariUzsBWfcJPTh6uuT1XM-2BKDOp-2B1FH47S1CdCENCVZJ-2F81v4e-2Fo4ew8JDWV2i3SkzqG78poZRr6cX8FU-3D), the anchors flagged "office CMBS delinquencies" (late payments on office-building loans) and weak mortgage applications as early signs.
* *The K-shaped consumer: the bottom is paying for gas.* Boyu ([Credit Exchange](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhMLqvsP3O-2F0vxY0wtmCp6VTPjCwXc-2F9ck2TFQAJAkqtC80iqgssefCa9iF43-2BCmceOzN7GhuM80e5w6Y1ctDCck3FwvVdOFD4FcuoyCq1hwA-3D-3DfQiO_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3z3c9Jikh9hCgm0d1koYqSfXjRbIrS8L2WgcCIFAerLsmts6WKwDTNZC2ACNp5W016O9-2Fzod-2F-2FJqUGrjckaIRds9RZX8viFkztmr9sd-2B92MwQQierxiSlJhbmYcr-2BpgPzTOYH2kP4xU8VWxgE1OCIvA-3D)) said lower-income households "got great tax refunds this year. But unfortunately, those tax refunds went right into filling up their gas tanks," so the expected boost to spending never arrived. The Excess Returns data journalist ([Excess Returns](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgOgWL7-2B9R8couf-2B5nUWl7jZHso-2Buhl-2Bd3wEn5gP7Sp76M0FSwNO6gStgGJdSAI02b4-2Fk6p3HU1574-2FvC06ngkq3mxjJDM0oLA5xZxrswFjtQ-3D-3D0D_P_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3-2B7B70q-2FVwrKvvn2wG5i0eMwljBMZijBN-2B0ibjOYWPAjx87Q6ASuj-2F-2BeOI5spZGi2Cw7rgkWudVTe-2ByJID784ppCFC57DSWH9vZpPZrBWty5tbGFtwacchIS4dRx6fP527POWwwzA9DtXRD7wYsrs68-3D)) estimates a lower-income family spends 8.8% of its income on gasoline, against about 5.7% for the median household. As prices rise, "people with lower incomes get exponentially more angry." DCP ([Forward Guidance](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjp98HLo1lM2IwvP3naAKAhjF7rFCivTMWDhw7mq-2BPtk-2FYeXtTrTvEcJDRoEoyB3-2BCrMSIK5-2B3ZSUc6txglw8p6IBXnsl1nr-2BhFwJK84aAkMA-3D-3DlDGq_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3zeW6bjE6jU74ZpSGDmutMRyFh183CV65eKulUtsoEHA-2B-2FJJO7l4sr7F5N7glvyYNsfvcBzRI2YSuLkelezltfvMpJriYSOGCH7wldV7tdthSOPT5LWZcS4Lilr4si8o-2BCymSkai0FqxMZEyWd-2Foux8-3D)) expects "the lower half of the K… to get squeezed hard in the next six to nine months" as diesel costs work through, noting that farmers who locked in this year's fertilizer are "paying real pricing now for next" year. There is a counterpoint. On [Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOh6AWMuIREi3a98WSp09rLbB7BHjriCdIZRqHpSYcJ4h2Nu-2B0-2Be8pa01wrt4OBd9xmRj3OVMOC04bdXqarJSywFXB5m2u1sAWCZWp6ZOAtQRg-3D-3DA-lC_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3z20L7GaarMMXcp6Qz-2Fwb4uNtaHkEwDpo44jqV67Chx2jEem5gnGFno-2Fwzo-2FYsVT3GNy82zE2iDVZkOdS1lbcBETQksAd3T8Q-2FhOmH9k3BsqcGe7r-2F8Vr-2Bj5ygpCrm0obsMVnmZddh2Qly8NSR60f7Y-3D), a banking source reported "some wage growth… in the lower income part of the economy," with those households saving more to cover gas. Sentiment remains grim: NAB's Attrill ([NAB Morning Call](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgwZF8jShPJgRxWxLT1TxwrHECZXkKnQj8Zu-2Bi-2FG1ZsEwaYP7GuKl2DxCwyDHdnBezzanyqbdg7jLjDHtGEamNb9ZV2oleK2SY4l-2Bt4euEz5Q-3D-3Dqo0w_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3x-2FoQLQ522HKVIn8nH9Oes6u3NIBzuursMVEYhYQeJw3O8d-2FwTwH9sMOYyhyjNFRsEIfB-2BO9zr5Cii1i4Fdtc45Xp-2B95tHmFbM8MtxcqZznVl9qobGEDmSBiMdvIBWUvVOUp0U8W-2BVv3Xw-2BtusZuZYI-3D)) said the University of Michigan survey was at "its second worst level since 1980." Schiff, a pundit, noted one-year inflation expectations rose "from 4% to 4.6%" ([The Peter Schiff Show](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhEJgWOCht2P9WrtXjuh2u9AtcFpNNyyDQeuHcT0kIUCCm9S0W0FCJWeKmqy7LJn4O5jiwf30dFfilVSNhTr9h9A5wyhywap1eUjkIDaMJahg-3D-3DK5Of_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv31vo7g5uGu-2BZ6VCYp5V-2Fk5wRSRIQ3GKsq1RQ8nVz7HEEolyaScyKCPylG6GD-2Fm6I-2BScQ-2FJOe-2FXnFzv0n7MthK950INhblygYXurqxXk42ng-2FkE2DJf0Z3vcTnangQT88mzZvH5mQ-2FoWvOP7LWBvuo7U-3D)).
* *GDP: still running near 5%, and AI capex is the engine.* Attrill ([NAB Morning Call](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgwZF8jShPJgRxWxLT1TxwrHECZXkKnQj8Zu-2Bi-2FG1ZsEwaYP7GuKl2DxCwyDHdnBezzanyqbdg7jLjDHtGEamNb9ZV2oleK2SY4l-2Bt4euEz5Q-3D-3DMjnS_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv35b-2F9UaurfHvraLZ-2F2QEYP5zIrFbKb4Bk3NupZG5G7D5UJiTvjKLZ5pEw57mMXbMEaq8OnBNyc48Gsa-2Fm9GnU5QXuz-2F1rx9kMAW3vUwUi3viv2PfUSynQA6LwcbDV31qcPZ9rCNqUvTOkFz3JkgFOy0-3D)) noted the Atlanta Fed's live GDP estimate for the third quarter slipped from 5.1% to 5%. Core capital goods shipments rose just 0.3% in August but still leave equipment investment "on track to climb at an annualized pace of just over 10%" for the quarter. Goldman's economists are at 3.3% for third-quarter GDP ([The Markets](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiFhygN4yTOfw-2B2oNPPC5YXYiLaYU33TA4ImPMs4euFvTfuGt9i83UOgACDg-2BsaFWiZjaaf0Qqtk3PQM9jjQ2EK3rIzvVMoSHi44UUL5Xovfg-3D-3DEWru_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3-2F2rA3oac-2Bh4GGWWsyZAU5gt3e7pbWJBNR-2BmfK3xDQqM-2BxP9dGi7vMjOh-2ByTfUwe40GTbDUFEuDde17ygQIwfLOFKHypB537MnaqyiGXkyipvtz1rbiGVky7hKNeKd-2FAbYjhkfcFPxccSwy65FDB1js-3D)). Tony Kim put the AI spending jump plainly: hyperscaler capex "in 2023… was like $150 billion. Next year, that's probably $1.3 trillion," alongside "a $2 trillion budget deficit at full employment." Gapen ([Bloomberg Surveillance](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjGKMwyZKAchWutLy-2BqE-2BtGwR1VhQ1PeK5-2FmdoNWtoRUoKIX51bM86P-2FB-2BgCklH2HBq0SExPxMaYYMosX5hIwyM3hDdWhyziOj-2B8Qs-2BMNqWNg-3D-3D_Cw5_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv36-2FOL49aOG75v-2B1cY6QeoL1ZLfq-2FwsPpDzImcKSyGOSMgJ-2FSPyxjqDb8cvI9rtEsuOreQ8s5WbIk4wNOGsWYHIH63p80sC4B-2F9zb2NmeOzVtLqZfEISXrHqHIgxhumXXPTavTK6BawQydAM5Nyj-2BH1I-3D)) flagged the risk further out: "somewhere in here in 2027, 2028, the growth rate of that spending will be slowing."
* *Housing and mortgages take the direct hit.* Mortgage rates are above 7%. Whalen ([The Julia La Roche Show](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOitBKMkelVTAV2cQOEgOWfZgX8kZI84HqKIg8AftR-2FkYNbfhVpYd3OQhh-2FxKtdA6pNAfAO1M7ndRNXxenz-2FdJaZkXqOeuLE-2BG4X9cHhONuN3A-3D-3D0E65_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3xNXKRsXnKCum3qPoJnfFM1Z3CxLrpti1OJjOjUAOISZ1wPgo1qVbQ1PTce2n3CmczC4MMnLWxi3qOj-2F0TW1C6eZEDaXrLiuXeWfOmOAtcJQ9QzpAHA9FyKpRbZ0f-2FX-2BPMjFVsvz7ur84BkZfGjub3Q-3D)) gave the simple rule: take "the 10-year treasury and add two points," and warned "a lot of people are going to be exiting the mortgage industry." Former Treasury official Sam Valverde, now at Falcon Capital Advisors ([Chrisman Commentary](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjbTs6CBTFtyW1VYlhwDQDel6fNa-2FUHjK01txRcDBUCplGcGHOrNpstZJGtDFiJHCsIEZw3Ys9AgVyctQ1OYTpoShx7Om7pt76ebwthyWIddw-3D-3DGjX3_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv32r3R-2Bh-2BuJMRE10xE4Dp1lhrPv9byc-2FHMv59pKNBpX4pCra-2FHJRWAOWQLS0yydB48zNQ0VCdXSNhuesLpBdgRPESkjexwkwqrm4ZoTXH0t4sxJTJNN5xI0-2FHCWO0vCm1VddQVp-2BhvF3Vwd75eiPChDI-3D)), described what a US fiscal problem would look like: not a default, but "progressively increasing rates, the inability of policymakers to shape that curve."
* *Fiscal math gets worse with every basis point.* On [Marketplace](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjLdkAKWNfqkHHc2H-2FYeny7ARegohEzhuP3YGu0XXayhNDJMlbSE5hJdHjucGa3cC-2Bxz2LCJvdiSigFWUuLokNt2PnNydH-2FjAH6NujKWgpMFw-3D-3D8rnm_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3-2FwWSzD-2FG80I52GKGTvkxX3-2Bt9TTdhz648YEg-2BKec1hBi8-2FYFDTuC9-2Fc5k6HCJ5vcivL0yH1z-2FR-2BZ8tm4PrzQLjADvauQQGVGOy08abc7ex5pUdxllkB-2FHp0mPw2c61pDXlLyJcqAJiL2c7qz9OMd6w-3D) (September 25), a new Congressional Budget Office analysis found that if rates run one percentage point above its baseline, the US pays "about $1.5 trillion more in interest" over ten years, and public debt reaches "222 percent of GDP in fiscal year 2056." The FT's [Unhedged](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOg4rUiN8ixZ8-2BrLUkvKxXQS6EImzoP1EYJDNnYuOKcE6n7ov2thv6yM3USSlfH93ZoOsv0QnH0txFf1CXjVUuV5Jt3nv1heRN2KBE30Wqoavg-3D-3Dzfkw_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3-2Bs-2Fs4waOsR-2Brqa5Ti13VKdyH21xoyzA2DN6LTqvg2Kbownn7ax1yrG34e-2BpkK77ym3uWdCE3UyMJZomOFZIAAVa3J7uhBzQ3-2FKttXs2oLF5PyHzrGNpaAv8WIhzuBzQzwIKok3-2BT06AVRWQdKsYt0M-3D) (September 24) noted the Treasury's bond buyback operation "has fizzled a little bit." It also argued that, measured against US nominal growth, a 5% 10-year "is actually a yield level that makes perfect sense." The problem is for countries without that growth: French yields are now "more than a full percentage point above German yields."
* *Tariffs are back in play.* On [Off The Wall](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiw4bKBlWiSt8hxTnpTQObIZhJD4-2Fq5KG-2BqC4klJHP24nmv6iTVdst0SGqNnGgVssk8BIHNnW30KboaV4ISuGOr4BeLzCCZJUiU7plhYNmGcg-3D-3DS44M_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv3ysh3QHYvpPNaUlllL9OzhTXEw2sFgv9-2BezxHp7J8pWeftBpv-2FeKhyee88-2FZRsdS8QGmBbF7jny5oyxFRK8Mpquj1FqPrCwuPSvG8Wl5YqimLqV02QSiiQf6Id67YIs8Skl-2FsK57nIOB-2FftnLWWD3kU-3D) (September 28), the hosts noted Europe "just got slapped with 50% tariffs on over $27 billion of their goods," Canada responded with tariffs on $20 billion of US goods, and "don't forget tariffs are usually inflationary." The Trump–Xi summit ended with "not a lot of substance" ([Marketplace](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjLdkAKWNfqkHHc2H-2FYeny7ARegohEzhuP3YGu0XXayhNDJMlbSE5hJdHjucGa3cC-2Bxz2LCJvdiSigFWUuLokNt2PnNydH-2FjAH6NujKWgpMFw-3D-3D_tFW_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbXiFVXEL-2BmJRF7mZMj6qj0Xp36WO6JykNb13cSTN4Iv32AGq1vD3g513lbE0R8C35Gp2xIbazJAY1qBl0HkK2Vh-2B-2FaVHIj38R-2Fxd5OVXudKT7rA1FzRU-2B-2F3UV2pFvkostgwuHB0my3lNwG77WkjIBLRoCR4cVClwuuH6wFLgnKIDsbzS5J491M5eaNYNnUNmHk-3D)).

## What changed

Friday's recap ("The Economy Won't Cool, and the 10-Year Broke 5%") had the 10-year testing about 5.14% and the doves arguing "later, not now." Here's what moved since:

* *Yields went higher still.* The 10-year went from a 5.14% test to 5.22% on Thursday and 5.27% on Monday. The 30-year is holding above 5.5%, and the five-year auctioned at 5%.
* *Yields stopped following oil.* Last week oil and yields rose together. This week oil briefly fell toward $92 and yields kept climbing, before Brent went back to about $107–$108 on Monday.
* *The diesel export ban moved up a level, and so did the pushback.* On Friday it was a Politico report. Now the President says he is "seriously considering" it, the Energy Secretary has pushed back, and Farm Belt polling is turning against the administration.
* *The Fed's messaging got more hawkish.* Williams and Barkin joined Barr. The October hike odds held near 70% (quoted between 64% and 75%). Market pricing for the next year rose to "more than three" hikes.
* *The dove camp added a big investor.* Friday's doves were a former Fed president (Kaplan) and a macro fund strategist. This week added a $190 billion CIO (Boyu) and credit analyst Whalen, who is openly calling for cuts by 2027.
* *Atlanta Fed GDPNow cooled a little,* from 5.1% to 5.0%.
* *The focus moved to data.* Job openings today, core PCE Wednesday, payrolls Friday.

---

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