# Payrolls Rise Just 29,000 as October Hike Odds Fade and the 10-Year Hits 5.34% - US Macro Recap - Week of October 6, 2026

> US Macro Recap for the week of October 6, 2026 (podcasts published September 29 to October 6). September payrolls rose just 29,000 and wages 0.1%, October hike odds fell to roughly 17% to 22%, and the 10-year Treasury yield hit 5.34%, its highest since 2002, with debate over the immigration break-even, why long rates keep rising, diesel at about 200 dollars a barrel and the first cracks in credit.

## US Macro Recap

### Week of October 6, 2026: Payrolls Rise Just 29,000 as October Hike Odds Fade and the 10-Year Hits 5.34%

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Friday's jobs report was the weakest in months, and stock investors loved it. Payrolls rose by just 29,000, wages barely moved, and the odds of an October rate hike fell to about one in five. That was the good news. The bad news showed up on Monday. The 10-year Treasury yield climbed back to 5.34%, its highest level since 2002. The Fed has stopped scaring the bond market, but that hasn't brought long-term rates down. The real question now is what the September inflation report, due in about two weeks, will do to December.

## TL;DR

* *The labor market slowed, but it isn't breaking.* September payrolls rose 29,000 against roughly 90,000 expected, with 60,000 cut from the prior two months. Unemployment edged up to 4.2%, but only from 4.14% to 4.17% before rounding. Average hourly earnings rose just 0.1%, leaving wage growth at 3.0% a year, a five-year low. Because immigration has slowed so much, the three-month average of 51,000 a month is close to what many economists now think the economy needs to keep unemployment steady.
* *October is probably off, December is still on.* October hike odds fell from about 70% early last week to roughly 17–22% after the report. December stayed in the 83–88% range. Bank of America still forecasts an October hike and says the case now rests on September CPI.
* *Long rates ignored the good news again.* The 10-year briefly dropped to about 5.15% after the data, closed the week near 5.28%, then rose to 5.34% on Monday. Several portfolio managers say this last leg looks overdone and have started buying long bonds. Credit markets are sending their first real warnings: the riskiest junk bonds just had their worst week since April 2025.

## What's New

*1. The jobs report: weak headline, steady underneath.* *(Bank economists and strategists; a labor economist; a market reporter.)*

On [Bloomberg Surveillance](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhE8rvo2sPYUL4QmHQhz3X-2F9ntUzS1roeWdu4o8OV7bvIYnLqkx8F4V3-2FmM2SyNInQk09FTkBULwhYmAtzJJx8LXW1-2BANVjDDKRXaeu4svEOA-3D-3DszuE_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9Ww3urG7TbeoMYWGRKWzGdAdAkbic3v44EK-2FkBlv8MexTxjFmhXNtMzxwxVjnfEwiK0OVFF2N-2FW0qmhltWFpDKlszGhJKh1t23PygcBhIb346EXjLj5QQ2jrLbrXR4LvYSw-3D-3D) (October 2), Bloomberg's John Tucker read out the numbers live: "We're expecting 90,000 jobs. We're only getting 29,000. The prior month also revised downward from 162 to 133,000." Average hourly earnings came in at "just a tenth of a percent," against three-tenths expected. The two-year yield dropped nine basis points (0.09 percentage points) to 4.69%, and the 10-year fell to 5.15%.

University of Minnesota Duluth economist Claudia Sahm didn't see a turning point:

"Job creation has stabilized relative to last year when it was really sliding. But we are not in an uptrend… We are, like, you know, at least three years into this low-hire, low-fire labor market. This is not normal."

Her view on the Fed: "I don't think this gives the Fed a lot of information."

Bank of America's economists made the same point with more detail on [Global Research Unlocked](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhEL2STjRDllkiKHMbUDCx6kbEXhdYTBA0ypxhsxOfPYuP-2FeDjyzkb8z6nZGfWjdP-2FXXoZRIWOWIPJrBaHmDbt7wVQU2QPAMyEfnSDk1BNVmg-3D-3DLcR9_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W2HsYHZtcTjw5c73foE-2BLbVh3GEbOUEsA1UQRVPTN5-2BXm-2BL8F-2BeiGWmMFxTvulpbYicGqffKlAlX4C2o-2BQ4VlYEowTkQb-2FLzYwHkuSKoLC8g7yElxaGiPepS8H3YRu9jrw-3D-3D) (October 5, recorded October 2). US economist Shruti Mishra said the report "was weak across the board" but "wasn't surprisingly weak." Private payrolls came in at 46,000 against BofA's 50,000 forecast. Her explanation is a quirk in seasonal adjustment, the statistical correction for normal calendar swings. This year's survey ran four weeks instead of five, which flattered August and penalized September. Leisure and hospitality slowed to 10,000 jobs from 37,000, and local government fell 13,000. Manufacturing and construction kept adding jobs, which she credits to "AI and defense spending."

The household survey looked even better, according to Mishra. Household employment rose "a pretty robust 406,000," and a measure of people who recently lost jobs fell to 1.88% from 1.91%. Her summary: "little sign of a broad pickup in job losses." Moody's Analytics' team on [Inside Economics](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjykNPc7o-2F2w4m-2FjPJfehFVQTMiAq-2FpJHwasF63ewD-2FGfQkGUTg7xiyy2Iwrploukez13CjUqw7mI393f1LtTzSyS-2BPb5erng2pyXp5LR-2BNXQ-3D-3D8Nz8_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9Wza6KkjSIr7Ew1bDi-2BkIqHGHOrcLSNBR7JT6fVxpvIB9vGeZyi0-2Bw7wySGHr1v9JL-2BTth6cBQjFqFbutwnImV76HZPjM-2FPX41lRv4pV3cB89migwAqnLaZiGymJ60RhiiQ-3D-3D) (October 2) said the employment rate for workers aged 25 to 54 rebounded to 80.7%, close to the cycle high of 80.9%.

*Why it matters:* Wages, not jobs, are the dovish part. Mishra called the 0.1% wage print "probably the most dovish aspect of the report." Moody's Dante DeAntonio noted 3.0% annual wage growth is "the weakest since the end of 2019," apart from the post-pandemic distortions. A labor market that adds few jobs and is slowing on pay is not the inflation risk the Fed's hawks worried about two weeks ago.

*2. The immigration math: is 29,000 actually a bad number?* *(A housing-market analyst, a market reporter, sell-side economists.)*

Several podcasts made the same point this week. The number of jobs the economy needs each month to keep unemployment flat, called the "break-even" pace, has fallen sharply because far fewer immigrants are joining the workforce.

CNBC's Steve Liesman laid it out on [Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOh1xY2Bf-2F2oedZ9C7PWkk2VaHbWcArecOgVUqbgUtzN7fhcxC77FUKSDzHqOGSG2gsEyuwpiavDyfdDcp3UxLmWcH8LKx3I7bR8t82xH4fcGg-3D-3DfqAQ_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9Wy9xXQrnLcn8hCLFD5PiRjPEskjLL13jhNHb3cUGabOJb-2FTz6eQ1WCGXo6IcP6-2Fqmd8HbM52-2BwQho2w-2BW7i-2F2AfbeMsD96dSjqeAYC-2Bq7nG-2FsX-2FRK6eAgPz3KBNR8kDk4Q-3D-3D) (October 2): "Changes to immigration and deportation policy means labor forces growing more slowly than it did before… A three month moving average of payroll growth at 51,000, right around the center of estimates of the break even unemployment rate."

HousingWire lead analyst Logan Mohtashami gave the range of estimates on [HousingWire Daily](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjv1njS8psARooQe8xo7dDs2-2F7hsR2pW1jqF-2FMBdtg2ei-2FYNOUVjFuiiK-2BNg-2BCX0XGy9quzZQ4VNSdweW0jB5MODFzZQZ0OyGsdOAxMwqUBBA-3D-3DSgHA_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9WwJJQU5vL7JQTLzRCdeh0Wdp5K22EF9RiWjy-2BJFs40CCSK9sI3MT7XwZ79urp5sx-2FZh8-2BZXznQdGYHbU6aHYueqp3zDD08Dr0lipSjZ1AKTbuY6PtUahhmBuroMcdlA5mw-3D-3D) (October 5). "My break evens are 78,000 because I use a little bit of a different diffusion rate and population control adjustments." But a former White House economist he knows "has got the break evens at zero." He added that break-evens "used to be like 240,000… not that long ago." His bigger point:

"If population growth is declining and slowing, the end of the job boom in America is over, right? So this is why you can have very, very low job prints and the unemployment rate go… This is what Japan is."

RenMac economist Neil Dutta agreed on [RenMac Off-Script](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOidk7gUmqmipVKiP0c7hgY3bw3jQjD4r9ojpQWICYAJ66eO6tTapLegZXMhhqpK7oUdBBhDYMaWPUAqLPbOR4EpM3VAbKn9jBd3gMN0p9vQsg-3D-3DSTci_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W4tnbU4hf54aEeUi7G4mEbHZnPHDIzlBx1pb9MKQafOCvO14I6ik2TZjgB5HzMtt-2Bjs5HohhhGKu43PkO-2F6CWtD5LvlKuLg6d8I9mQSwdRqhvoFC3JeyMFyFecX6PsgXUg-3D-3D) (October 2): "In this economy, 51,000 per month over the last three months is fine. Breakeven rates are much lower because of population dynamics." BofA's Mishra put the three-month average "very decently above breakeven."

Sahm, the economist, warned the data are still murky. Revoked visas and reporting lags mean "we don't have a good handle of it." She sees some wage gains in immigrant-heavy industries like construction, "but, oh, yeah, we're also building a bunch of data centers."

*Why it matters:* The Sahm rule, a recession signal that trips when the three-month average unemployment rate rises half a point above its low of the past year, is nowhere near triggering. Unemployment rose three-hundredths of a point, and BofA notes that "in the last one year the unemployment rate has still fallen on net." Low immigration means headline payroll numbers can stay small for months without the labor market getting looser. That keeps the Fed's attention on inflation.

*3. The Fed's hike odds collapsed, and BofA is the main holdout.* *(Sell-side rates strategists, a bank fixed-income head, an FX strategist.)*

Liesman ([Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOh1xY2Bf-2F2oedZ9C7PWkk2VaHbWcArecOgVUqbgUtzN7fhcxC77FUKSDzHqOGSG2gsEyuwpiavDyfdDcp3UxLmWcH8LKx3I7bR8t82xH4fcGg-3D-3DYWSz_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W334c3aB0JJ-2FZcK76Q6XzwV2yfvVBt94qoMU6iiAljB-2BNu8Q2350HE4eyrOdmtVmZtzGJKlc-2B8UQd9gXWqBXv7eO6GCCRK-2FYlCHI-2BCGivpROqndWegc1nWT2aYjZUjX3-2Bg-3D-3D)) had the odds of an October hike "plummeting to around 20 percent from 70 earlier this week," with December at "83 from 95." Key Private Bank's head of fixed income Rajeev Sharma put it at 17%, down from 64%, on [Key Wealth Matters](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOh8i4WCVLWDK-2Bp-2Bhpg6MfrNs2w5kWF5yIgK17SFUPOdGbd-2BiC-2BFlkaiNAlezxbR6LT0ehZ8B2m5Y0srPKeqBThLcnVnMJVidWrvXZuvkM1auQ-3D-3D2Zdm_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W88YCy2b4jpyDoArjRWHHbUoh-2FMZ0cpNWLYjjIL3XyK19uat9mABl4Tkr7bX-2F2DaonmxaKW3QVrUCbyy-2FCI-2B1SHFUUB5tsLf41nYyK4kfCfo7rdgdFgsK9gwpIiWZEWpVg-3D-3D) (October 2). By Monday, NAB's Taylor Nugent on [NAB Morning Call](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOj3Upucx42hFLwyuw3RNBPaUhKMr4ON8wuCbiKos1R-2BOxRef5vkjKzV-2FXjH3o63n6ATjzV479ngn37nhwuhDQTPBU8hKIExIm3bkG-2FiQWSq2A-3D-3DDAk6_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9WwJR6JQa-2BSdY2jRWhQb04cP5i5oxbwthwnPLhbU4SFbwGfpZXePJ7FbgSW6GRnr9XFsYfmlRxIQv5e3JtZUiRTisA-2BtYWPtmBLN-2F57WzDtx-2FCBgRHsS5luM4pVLWtyPsVw-3D-3D) (October 5) put October pricing at "around six basis points," little changed after payrolls but "down from about 18 basis points at the end of the prior week."

BMO's Ian Lyngen on [Macro Horizons](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOi0sHhuRbfTQaKBi96hPbp39KBhiHyG6tO7-2Fp4OPUrtIdws-2FY1yBbJc6rnTqPGmbyp8Dd6vDsYslI-2Bej-2Bnm31zlvOyX69DtDIl0ad0dqg5U-2FA-3D-3Daxyg_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9Www6ukCcmCt2eIAgfCmjZJy2cBhIH1h6non-2Fjj8n1tKia4UCZX-2BAy10AE1M1Y7UdTtuVRXcmKQd9ahvzSMtHmzDFS0LA-2BqUROfc-2FZ65gNOVytaY2ETeZM-2FXteo8x08Lzuw-3D-3D) (October 2) said the Fed's own officials did most of the work. Williams and Vice Chair Jefferson suggested "the Fed can afford to be patient," and Williams "specifically implied that just one additional rate hike may be needed late in the year." Liesman also quoted Minneapolis Fed President Neel Kashkari: "I don't have a strong view on October versus December, but it did want one hike this year." Dutta noted Dallas Fed President Lorie Logan "still advocates for 50 basis points of hikes this year."

Bank of America has not changed its call. Mishra on [Global Research Unlocked](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhEL2STjRDllkiKHMbUDCx6kbEXhdYTBA0ypxhsxOfPYuP-2FeDjyzkb8z6nZGfWjdP-2FXXoZRIWOWIPJrBaHmDbt7wVQU2QPAMyEfnSDk1BNVmg-3D-3Dks8F_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W-2B9u7ogNnlJs8AOgQGXweq90ICIC-2F-2BhkwUhA6zNva6CHCRuqigpAwI21a4-2FrO8DRa25CBJb-2BKFAMjV72XeeMVl458u4DamU5ZyCqG0Kpks3BMpcP5-2FCVfMo3xIjXVJxFVg-3D-3D):

"We think it's a mistake for the Fed to fail to act decisively and convey what is clearly a very asymmetric reaction function to markets. If they don't go in October, they run the risk of ultimately having to hike more next year or paying the price in terms of inflation credibility."

She conceded that "the risks have shifted pretty much entirely to them not hiking in October." Marc Chandler of Bannockburn Capital Markets, on [The KE Report](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiYwB7O7yY1rS-2B2XWYjKtX-2B7BFHwyR5-2FJhU0zJagbRsVP5AXhYTIaixPauTJmcExyf2A1AXYIJ0-2Bo5Hzk3W56SkcDMabzmRJqJOiK9zWEOClw-3D-3DAxbO_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W0-2FHUh6qHuNEYCK1R-2FxND8iGIOTF5YSNbv1TN6iYNyQkrqcMq2LrjselTH99IuydlBIGxZk-2Fdt1Nbx2dUSShsYiDRuUrn2u5k6nsuAqDc4m4eVYA-2FSqGVHuFC-2FbAF-2BlLwQ-3D-3D) (October 2), expects a skip and then more hikes: "I don't see why the Federal Reserve would not raise rates in December and probably again in Q1… I think that the economy is growing too hot."

*Why it matters:* Lyngen added a political wrinkle. Because Chair Warsh started hiking in September, "a pause immediately ahead of the midterm elections might be viewed from a political lens." BMO, BofA and RenMac all said the same thing about what comes next: September CPI and PPI "cast the deciding vote."

*4. The 10-year hit a new high anyway, and investors disagree about why.* *(Portfolio managers, sell-side strategists, an academic, a housing analyst.)*

The bond-market timeline: the 10-year fell to 5.17% after the jobs data, was back at 5.24% by late morning ([Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOh1xY2Bf-2F2oedZ9C7PWkk2VaHbWcArecOgVUqbgUtzN7fhcxC77FUKSDzHqOGSG2gsEyuwpiavDyfdDcp3UxLmWcH8LKx3I7bR8t82xH4fcGg-3D-3Da3wf_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9WxL0-2Frsf-2B3bo3AnrlvBctLHHOW2PHDwUqdJIuL6A9X5UnSAhBvu1tdJ5r6WHXgGSSeA6n1GQBZoYz2-2BibjTWfDb-2BgSvZF5aeWuriyKCQbtAZpw-2Fie1X-2Bn6yPpkvXFR0ofg-3D-3D)), and closed the week at 5.28% with the 30-year at 5.63%, per commentator Peter Schiff on [The Peter Schiff Show](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjxAtRhUmghFV9sKo5h7otuS27CuMi-2BjTKYl1nWpQKjTMWeW3Hga689qD1DfUQpjTsvB2TPMu8ngT4RsV2hhlyvdFyk4ihevvZeTyjEHxQ4wQ-3D-3D3MVu_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9WyfYqHg9y7ivNwgoEogmUHDwijhuNjJAtnCYQTYuhfhO3dOD7-2FUMXMoWQjNPR6fdr1CYDv8-2BbuX8LiHN6sCKzWSx2Cr9vDJYGFiyc8M-2F1DxjW99I5ATDb9Sh7bCAW19brg-3D-3D) (October 3). On Monday the 10-year rose "7 basis points to 5.34%" ([NAB Morning Call](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOj3Upucx42hFLwyuw3RNBPaUhKMr4ON8wuCbiKos1R-2BOxRef5vkjKzV-2FXjH3o63n6ATjzV479ngn37nhwuhDQTPBU8hKIExIm3bkG-2FiQWSq2A-3D-3DDPBs_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9WzS9t5uDkXPqaQZjrvYPpQz1y-2FlyPt-2FdcHyg45BKlGXSscl9N3hcRoPfuZGy70wWMSRZMflw7JgLn1GNd9iAZ2sea4bZ45pnS-2BXx9Ieh36KVZxpspO-2F9D8iB-2B-2BQrL3o42Q-3D-3D)), with 10s and 30s "both of them up to new post-2002 highs."

There are four competing explanations.

* *Expected Fed rates have reset higher (BMO).* Lyngen said the selloff "has been driven by higher average expected policy rates, not an unanchoring of long-term inflation expectations." The San Francisco Fed's model shows the average expected overnight rate over the next 10 years "has surged above 3.8% to reach its highest levels since 2007," above the 3.7% peak of 2023. "The market is pricing in a durable regime shift to a world with higher policy rates and higher real yields."
* *Growth, supply and deficits finally caught up (Andy Constan).* On [Excess Returns](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjBlYAh1Xwq-2BWosVD7RRFb8S23aLhYwEtNLSIpeLJXWzOyJLIdG6zI709UmNq8-2BlxCAzQXsFCrxJEM7Kv-2BZmu3CFOgaapKcySbhCc1YAUauZA-3D-3DkFfG_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W-2FEM-2Fe2ilJJIRpNcSrdrpEk5CVjXxDwsF3jO-2B-2Fz-2FKI7UfQJFDM9sxl5WUcnLww7BFGbfF3la3spjaF107hdvPBKp-2FELWxlIzKzg08-2FvwZ1BIIN4-2BNibJI1HpYypDXHdWEA-3D-3D) (October 3), Damped Spring's Constan said bonds "never really corrected" to "very strong growth expectations" from consumption and AI, plus AI debt issuance and a "fairly large deficit." Inflation swaps (contracts that bet on future inflation) are "mostly not really doing much," so the move is about growth and supply rather than inflation. He also blamed Treasury Secretary Bessent for "a really terrible, arrogant decision to sort of dare the bond market to go higher." His bottom line: "There is not a bond market crisis at the moment."
* *Forced hedging by mortgage-bond funds (The Macro Trading Floor).* On [The Macro Trading Floor](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgf1TCd8whfK7Y9MZKxEtuM62-2BgmIHcFZzWjax0CeUsXFj8EGsO-2FrEdxGDH366GhF4aXo8H3NSZf6FHIxpUwNULC8pCeqIhUFQHOqTzFeWq0A-3D-3DhXNj_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W4f6d6pg-2FugAXE08Cu6LNog1Dzey6AL3MzVpkk0Yz8d9pSK-2BbS-2F1e1PJa6juNMIESElDKCfv-2B7zBbJcH6mHIYTDk86sYnduBv1Y1E6NPm00WQLRHVwVZc7B4knxZLZ83sw-3D-3D) (October 2), co-host Alf Peccatiello cited street rumors that "a couple of people running a large MBS risk at hedge funds are having a problem." When rates rise, mortgage bonds get longer (homeowners stop refinancing), and unhedged holders are forced to sell Treasuries, which pushes yields up further. He blamed multi-strategy funds with "way too much capital" taking concentrated, unhedged risk. "After such blowups, there is a better chance that things stabilize rather than get worse."
* *Bonds have become risky again (Odd Lots).* The academic guest on [Odd Lots](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOh7RDJ64E3Wkr2Ex-2FDoGS-2BamnhnFQxj7L3qMsnbPxH4IRmxNt-2FykVqM27OCttLOt-2FyzdscAkQ1AzVzfaINh2RCOzTAv-2FoBcwt5okS-2BQERmbuQ-3D-3DMcZq_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W5QynUiji5jxXkNzQcvJ7c4Pca7iXIUguB2CVlU4GgDcF5UF9LZnrWvqrtG40qZ22QQi573Y8KBrVUXON56zOxJTXQodwMADoWbJ7zZIK2BTnWO0dNVPJNJoD71SI1Waeg-3D-3D) (October 5) said that from 2020 through 2025, "the majority" of the rise in the 10-year yield can be explained by "bonds becoming more stock-like." Bonds and stocks now fall together, so they no longer hedge each other, and investors demand more yield to own them. A full return to 1980s-style risk "requires a perfect storm": supply shocks plus "a Fed that's willing to, willing or forced to accept the recession."

Mohtashami ([HousingWire Daily](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjv1njS8psARooQe8xo7dDs2-2F7hsR2pW1jqF-2FMBdtg2ei-2FYNOUVjFuiiK-2BNg-2BCX0XGy9quzZQ4VNSdweW0jB5MODFzZQZ0OyGsdOAxMwqUBBA-3D-3DquP4_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9Wwrfd-2FMIGauGZNIw6Y4L1JMAJcahheSxC9RHfGg9Rii6yxmY3I-2BbJbYfBiyucwXaLPAMQXB5p4h-2FK6EX61bvjJWFvp9fI4nU1bN5GtBKIb2ZLIt1wcIP-2BzLoIAsDNG4yqg-3D-3D)) gave the geopolitical version. The only time he's seen the bond market rally convincingly was when an Iran deal was signed "and oil went all the way down to 68." Since that deal collapsed, "the bond market is like, homie, we don't trust anyone." He also read the Fed's message as a sign "the Fed is starting to worry about the long end of the bond market."

*Why it matters:* If BMO is right, a dovish Fed should eventually pull long rates down. If the hedging story is right, the move could reverse quickly. If Constan and the Odd Lots guest are right, 5%-plus is the new normal.

*5. Diesel, not crude, is now the inflation problem.* *(An oil strategist, an energy-data analyst, a Mastercard economist, a sell-side economist.)*

Morgan Stanley's Martijn Rats on [Bloomberg Surveillance](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgmjSoCDcSIntateNbWrw0XbRoR-2FmmXDxZSXQ6KXyp1RQJcKE8MoKFEObq5NAmM8HwDQpMeTN6CU3fu8-2Bb6XQnUGpHzRRcQJOb2LwAszcKZDQ-3D-3DMJlK_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W7ArkGuCoBZD4mkYD7w8Wx2nXthUR6kBVEGsduk4EWRtbJQ5NwnTHEvBc3JimKnfkuXCmEG4lAUWtntdmZiTDLMKvOdswR4SD4syaoMglMO9fWPo-2FVdUycF0PDeSooMVFw-3D-3D) (October 5) described the oil market as "three combined major disruptions": crude supply through Hormuz and Bab el-Mandeb, "a severe crisis in global shipping," and "a significant disruption in global refining." All of that shows up in the price of diesel: "Diesel is $200 per barrel. It's all-time high." His worry is the next few months. Refineries are skipping scheduled maintenance to profit from high margins, so "the amount of refinery maintenance that is already being planned for 1Q, 2Q next year, those are very, very high amounts… our fear is that we have to live with these high diesel prices for a good couple of quarters to come."

The energy analyst from Data for the People on [Excess Returns](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjBlYAh1Xwq-2BWosVD7RRFb8S23aLhYwEtNLSIpeLJXWzOyJLIdG6zI709UmNq8-2BlxCAzQXsFCrxJEM7Kv-2BZmu3CFOgaapKcySbhCc1YAUauZA-3D-3DW-BB_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W8HE8trEJaMTWynk-2BT9ZQnCV5lGAcY-2BUPkvld0UzqfvaWmegd0mdovSv7NkgbX3osykvH0HvUIiQwJyTjg7PA794C3ACZ-2FnTPH9laMfTpraEpAWO-2FgXy-2FDT8rn3pYplsNg-3D-3D) had Gulf Coast crack spreads (the refining margin over crude) at "$85 right now." US diesel inventories should have been building all summer but were "draining them or keeping them flat" ahead of heating season. His model says diesel at these levels for a full year adds "0.5 percentage points of upward pressure" to CPI, and that it is "completely structural and it… doesn't depend on opening up the strait."

Two smaller offsets: the G7 agreed to release 100 million barrels of reserves over several months, which NAB ([NAB Morning Call](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOj3Upucx42hFLwyuw3RNBPaUhKMr4ON8wuCbiKos1R-2BOxRef5vkjKzV-2FXjH3o63n6ATjzV479ngn37nhwuhDQTPBU8hKIExIm3bkG-2FiQWSq2A-3D-3Df_8p_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9WxUcaFu-2F7i1cYT-2BHOr9f6LTXy2XbgNMtdeyk7WoxYrdVzUrg2ewfEEgHXU3el-2B96IbPcTQweUHv9KdEBK2OrokSZygORRjfsENXGhZawX4AY61Q8-2FuZJ1uw7ogmaLgm-2FWQ-3D-3D)) noted is about "a day of global demand" but included front-loaded diesel. Brent briefly dipped below $100 and was back around $102. The ISM services survey's prices-paid index rose to 74 from 72.6.

BofA ([Global Research Unlocked](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhEL2STjRDllkiKHMbUDCx6kbEXhdYTBA0ypxhsxOfPYuP-2FeDjyzkb8z6nZGfWjdP-2FXXoZRIWOWIPJrBaHmDbt7wVQU2QPAMyEfnSDk1BNVmg-3D-3DLIXh_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9WxdVynsUR1Lebs38-2FPenuk3iEBVTEc2F-2FKRn4hbV-2BNdazJDn9WTSfDkrJyAJDkh16K5eFat-2Bzsqw9rjnEnp-2FJ4YcsAu2mxmdQzGs0foNt-2FUt53UXIoWVpq1x2LJeNaI6aA-3D-3D)) separated the noise from the trend. Strip out "the Iran war, the AI-related inflation increased tariffs," and underlying core PCE "continues to run at 2.5% year over year… with little evidence that the trend has improved over the past 12 months." JPMorgan Asset Management's Priya Misra on [ETF Edge](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOj09RnYJfgHm6c9QYu2VewfHoZi4ecC-2BHKpEWgPhN65LmStgqyKJccYhtWz0OdPtUlq31xyaGa0Lc-2BjehLnHOkhUufXHQ8BgN1Y7qDTLpD5Dg-3D-3DVvLb_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W-2B18ppXO7cPt5OBdgSsbhxiCTl98ud7jfazc96GDcInnLZ-2F8zgy6-2BKSrTwXPp-2BjwgvZs9xafE2oX4hFZlDgG6dpND2vpO6rIfQHxrcs24gQtN-2FEF5P1ls-2FCV9iLsBYqOHQ-3D-3D) (October 5) is more relaxed about tariffs: "it's coming from tariffs that's leaving the data over the next few months."

*Why it matters:* Mastercard Economics Institute chief economist Michelle Meyer said on [RiskReversal Pod](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiLlBc-2FGO7t133YipltHEyk3Vi7wecNQDtWmpaCK0HtkgjYPgLjjKhSQmqtjU7faa0IvgghWGwwPy5tGxCYrP-2FFJQFehWSbLetlitotnaGJvg-3D-3DXYBK_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W-2FFVTJHRMn9b8aXHU0RCpr82RXB7zloVOVl-2FUC1v69LwejFHCaviMP-2Bo2Q8HYyTKgX-2FjtD-2BoDHg2UNbCy-2FQbpNlu1MeM1fDhhLgtD7M0o0E0EzaQ-2B4a8-2BxxiCdPB-2F30-2Bjg-3D-3D) (October 5) that wages are "hovering very close to headline inflation… we're like right on that line at the moment." She flagged diesel specifically, because it "can pass into underlying goods inflation." With wage growth at 3.0% and diesel at records, real (inflation-adjusted) pay is close to turning negative.

## The Debate

All three camps showed up this week. The soft-landing camp gained the most from Friday's report. The reflation camp still has growth data and the Fed's hawks. The stall-speed camp has new evidence from credit markets.

*Camp A: Soft landing. Growth is strong, the labor market is stable, and long rates are overdone.*

*Operators:* Priya Misra, a portfolio manager at JPMorgan Asset Management, said on [ETF Edge](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOj09RnYJfgHm6c9QYu2VewfHoZi4ecC-2BHKpEWgPhN65LmStgqyKJccYhtWz0OdPtUlq31xyaGa0Lc-2BjehLnHOkhUufXHQ8BgN1Y7qDTLpD5Dg-3D-3DKLi0_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W4DSZU-2FPe44Zn-2BxW5F85axw3MCCQY2kgREuScVgE-2FOvIToCVSXhZwGOken0Oipk7L2-2FOfOCCzRAmoF9LS-2F75Ju-2B15XWgcG-2FhcWDXYjF6nj6kQJ5TMYH9INmiyEnFt-2Fj8xw-3D-3D) that the last two weeks of the bond selloff had "not been a fundamental catalyst. In fact, I would argue all the economic data over the last two weeks has been actually slightly on the weaker side." She sees "maybe one in December and perhaps one more early on in the year… But that's it. And the markets are more than priced for it." Federated Hermes' Steve Chiavarone, on [Bloomberg Surveillance](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgmjSoCDcSIntateNbWrw0XbRoR-2FmmXDxZSXQ6KXyp1RQJcKE8MoKFEObq5NAmM8HwDQpMeTN6CU3fu8-2Bb6XQnUGpHzRRcQJOb2LwAszcKZDQ-3D-3D4GJ2_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W5BCTowbEMiYWWKyKvtuz0Kb5fq-2F3uOg-2FMoxm96SAFg-2BVh-2B1RMdXITTH4AHlFBSNso28mpXmH3Epi2bdCj61FiXZfZqAITRgr-2Fh5Q97i5U6vQSvRL0JPWZJ2079MGsYu7A-3D-3D), made the equity version: "What we're living through right now is the earnings story of our lifetime." On 5% yields: "Why are we shocked and clutching our pearls that long-term bond yields have to reflect that and be 5% plus? And by the way, there's a name for that terrible environment. It's called the 90s, and it wasn't so terrible."

*Data insider:* Mastercard's Meyer ([RiskReversal Pod](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiLlBc-2FGO7t133YipltHEyk3Vi7wecNQDtWmpaCK0HtkgjYPgLjjKhSQmqtjU7faa0IvgghWGwwPy5tGxCYrP-2FFJQFehWSbLetlitotnaGJvg-3D-3DeRFZ_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W4pnDA5WY-2FUNq70Aalb2hyK5cL2uTzTgMc7JyTiGmDkwKbAng523ebE7KXcMsWMgOm6ao4eGUOfoA-2FSGH81d4jBFu7FnXnXaV4FfR10gW6a-2B-2Bz8Biyr8BqJcYBh-2BLytn7w-3D-3D)) said that in card data "spending is increasing across all the income groups." Wealthier households are spending faster, "but it is not the case that spending is contracting for the lower income." About half of the gain in retail spending is inflation, "but that means the other half is due to real volumes."

*Pundits:* David Sacks on [All-In](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgKIafiDRFtPHu50SdvLri4ZM30kMqYokXyiTnXl6NvUDf1D9v25gp9WkLmLDXqUdjJ9syWwIgdurQF5-2BhrDpguDIvIokT7aUWui81cNkaxxg-3D-3DNM7z_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W46wS0rr8-2FkQ9c3QVyx7dhU9ZMrx6FtDzONFYtVfDPOdgkjADorHI8IGKmcE8Bbd5zcGi4Q3iDOd3892zIgi3mbxhe16ExCs6oCN-2FfTalKkhjjE-2FV9-2BQEwOFi8-2FQm-2B-2BXXQ-3D-3D) (October 2) called it "a super hot economy." He cited the Atlanta Fed's live Q3 estimate at "around 3.7%," and a poverty rate at "its lowest level in history, 10.2%," as evidence against the "K-shaped" story.

*Camp B: Reflation. The economy is too hot, and the Fed isn't done.*

*Sell-side strategists:* BofA ([Global Research Unlocked](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhEL2STjRDllkiKHMbUDCx6kbEXhdYTBA0ypxhsxOfPYuP-2FeDjyzkb8z6nZGfWjdP-2FXXoZRIWOWIPJrBaHmDbt7wVQU2QPAMyEfnSDk1BNVmg-3D-3D_VKs_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9WxPLCuhejjrc-2BcXh-2FxCypjKYvCCwzbNseSuAev4Iuqepvx2NvCESVoX9uzdH8wqTcKw0pNzV-2F5iY-2BQUXjKaP9KKH00kAAud5xaft2eM4yiukli9hba7UdjpOJHHXgOyCww-3D-3D)) lists upside inflation risks "from strong AI related investment, higher energy prices, pockets of, you know, potential labor market tightness, resilient consumer demand." BMO ([Macro Horizons](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOi0sHhuRbfTQaKBi96hPbp39KBhiHyG6tO7-2Fp4OPUrtIdws-2FY1yBbJc6rnTqPGmbyp8Dd6vDsYslI-2Bej-2Bnm31zlvOyX69DtDIl0ad0dqg5U-2FA-3D-3Dc3wN_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W-2BnCH5g-2F1LNt0KCT6adGS4aBfcvBLhhnQNSs4XsKGCqwz0w7L6t6U0ulYRBWOjNjOrSAW-2BneKZfDBMQBuZqdYqHoPwmrDFIE2vE-2BeDWLbn1joRT-2FoDB8PDqPOe9xOSn1SA-3D-3D)) pointed out that private domestic final demand (consumer spending plus business investment, which the Fed treats as the cleanest read on underlying demand) was revised to 4.6% in Q2, "the quickest pace since the beginning of 2023." The Atlanta Fed tracker has it "running above 4%" in Q3. JPMorgan chief economist Bruce Kasman on [Global Data Pod](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOi4K6eZK55eIdKB-2FHfW7B4R46PdRwibufylyV1T6WX-2BtiVjQjGZPG0NtXoQmxfeGov9WgZZIKrqeQ3c58vZ6eIJ4H3imNmSMxeK2CvSQG5dGg-3D-3DuntN_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9Wzc41yTtweNF5VBDsYh4wq6oVZF01VofT8F26PElz2Wt8P5Ke-2FVyBBJp09oITPlRXSJrTCDn-2FfrCPoPlnMjXtuw9tQzU1lQBQFRA7q1qSrd5CA71qGz17iKhCQwppcilTQ-3D-3D) (October 2) sees the world "running more than a half a percentage point above trend globally." He argued labor income is growing "4.8% in the four quarters through Q2 without any job growth to speak of," helped by large upward revisions to income. "It tempers my concerns to the downside off of a one-month weaker job number."

*Camp C: Stall speed. Jobs aren't coming back, and high rates are starting to bite.*

*Operator:* Chris Whalen of Institutional Risk Analyst, on [The Julia La Roche Show](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOibjAwXQhch079wl8BwiETPYyA1NMr5G5KMGeXUFJibnRd1nlFfi1iQyl2iN5TijA2eADL5vVEDeS1nW407U28TsQ-2BLAqb61xsoKcmwBMXtyQ-3D-3DVvyY_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W0fq31GYlIomly4OY86l4bg4McXPg0IvXxxXKwl5sI2DdJ5z83pREpFucm5BQdYF-2Fnof41kqhOqXwPHm74u7L2fMF4Rcya2FRiCpRjYkAV4qf2jZMo6JORLZiRrCVnlD4Q-3D-3D) (October 3), said the "K-shaped" economy is "fast becoming an L." Higher prices are now squeezing the affluent too: "Inflation… impacts everyone. It's just a question of how much and when." He expects "a slowdown, even though we're spending $2 trillion a year more than we take in with taxes."

*Sell-side economists:* Kasman's JPMorgan colleague Joseph Lupton ([Global Data Pod](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOi4K6eZK55eIdKB-2FHfW7B4R46PdRwibufylyV1T6WX-2BtiVjQjGZPG0NtXoQmxfeGov9WgZZIKrqeQ3c58vZ6eIJ4H3imNmSMxeK2CvSQG5dGg-3D-3D86sP_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W6inOPFgTHG-2BQ9pKh69UmJTFOkZfOO8a3jnZNlQ89AnnSNjfk6OzRR7gi6AMTvC2T78N3m6u0n1g11Ja-2FUwCtddY2m2o-2FrMKpBhrTegXOSvt9rzVFC-2B-2FJPSYxh3QaKSVuw-3D-3D)) pushed back on him directly, after Kasman himself conceded that only one of the last four payroll reports was strong ("31… 133 and 29"). Lupton's position: "if you're going to grow zero jobs for the next year, you will not sustain this expansion." Moody's Mark Zandi on [Inside Economics](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjykNPc7o-2F2w4m-2FjPJfehFVQTMiAq-2FpJHwasF63ewD-2FGfQkGUTg7xiyy2Iwrploukez13CjUqw7mI393f1LtTzSyS-2BPb5erng2pyXp5LR-2BNXQ-3D-3Drt-H_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W307YqMgFSeAE31AjhWNtIDiA08wP-2Bd376Al0B-2FdR-2BkGSXiS2Xl3E1M3mOaK5H153B8f7IrqrGW0KcWzsIe0bx1VK4-2F-2BSMUdotGBP6fgMIVKDmHJLE6W6m4KX7enbpBH6Q-3D-3D) read slowing wages as evidence that "we're not at full employment. We're operating below full employment." His colleague Marisa DiNatale added that August real disposable income growth "was zero," while real spending rose 0.6%: "We have people spending, but income is basically flat." Chandler ([The KE Report](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOiYwB7O7yY1rS-2B2XWYjKtX-2B7BFHwyR5-2FJhU0zJagbRsVP5AXhYTIaixPauTJmcExyf2A1AXYIJ0-2Bo5Hzk3W56SkcDMabzmRJqJOiK9zWEOClw-3D-3DlqKU_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W3Qb7RqBugAwkRMM44wuYWFID-2FuWAz-2FhPKCMqaBR8jonLDl6LzsuROUCT6DNoNAWt2P3J51ttbQeb2-2BmIADcMBJLlU34C35UcWBi49dvtpWLAltZQok4mGTNU6Wh9pK76w-3D-3D)) is in both camps. He wants more hikes but warns: "with this, not just the level that interest rates have gotten to, but the speed, I think that it's going to cause some damage… the labor market is vulnerable."

*The honest read:* Camp A won Friday. The jobs report took October off the table without showing real damage, and Misra and Chiavarone are putting money behind the "overdone" view. Camp B still owns the growth data. A 4.6% demand print and a 3–4% Q3 estimate don't fit a stalling economy. Camp C has the newest evidence: credit spreads are widening for the first time this cycle (see below), and the Kasman–Lupton argument is the clearest statement of the risk. Nobody knows how long consumers can keep spending without job growth.

## The Trades in Play

*Operators putting money to work:*

* *Buying 10-year Treasury futures above 5.25%, and adding up to 6% (Matt Cole, Strive).* On [What Bitcoin Did](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhFGGzHqsaeFLEi5SbepjAOKmDurZqoLWYKOuqXjokf2e4E9mHABenPbZ4Vs7M1uUIXigC1WooY-2BDNbP9l9EB9MIojzd5lF-2Bs0XxugKA2Hb6g-3D-3Da7bc_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W8eoFzjk3ua-2BioN9e3ApJCpeFvBJeES2H9EyaowA4CUvEMYKVFMZLRuFN-2Bxs-2FjOn-2FrzJUXKkQDW5aogpq6jTVAs6B-2B5gyHCrHLTf1DeH7GbT2EaT5d8HYrECw3UXamMaPQ-3D-3D) (October 5), the Strive CEO said his total-return bond fund "for the first time in its history" went long duration (bought bonds that gain when long-term rates fall). "It bought 10 year treasury futures when it passed 5.25%. And it would potentially, um, increase that duration long position up to like 6% on the 10 year." His reasoning is policy, not economics. He thinks Washington won't tolerate much higher yields: Treasury "will have to step in substantially more," and he noted Bessent's buyback program started at "six billion… of effectively a trillion dollar pot of money." He sees a fair-value 10-year yield "over 10%" absent intervention, but "I don't think they will not let that happen."
* *Adding duration and quality high yield, cutting subprime consumer debt (Priya Misra, JPMorgan Asset Management).* On [ETF Edge](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOj09RnYJfgHm6c9QYu2VewfHoZi4ecC-2BHKpEWgPhN65LmStgqyKJccYhtWz0OdPtUlq31xyaGa0Lc-2BjehLnHOkhUufXHQ8BgN1Y7qDTLpD5Dg-3D-3DrqYM_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W-2BwN3ewJTBU-2Bzh1-2B7bauwjEZX8il6jBpKXjloYy2N6ITKLvyIkAwsJZ5w1jUZYSsipkNU6X-2BS6GalHgGrwBISMwQ9EwGB86wXcq6iyt-2B5KwfW-2BsEx5bYU83jks-2FPNYOyRg-3D-3D), Misra described her moves in the JCPB core-plus bond ETF: "we've been adding some high quality high yield… And now we've started in the last few days to increase some duration." She is "trying to reduce our exposure" to "lower end consumer ABS, subprime auto" (bonds backed by auto loans to weaker borrowers) and increasing exposure to the AI trade. She likes 10- and 30-year hyperscaler bonds because "they're not even one turn of leverage." Her key observation: "this rise in rates has all been a real rate, real rate led move, not inflation."
* *Short duration, BBB credit for income (Joanna Gallegos, BondBloxx).* On the same [ETF Edge](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOj09RnYJfgHm6c9QYu2VewfHoZi4ecC-2BHKpEWgPhN65LmStgqyKJccYhtWz0OdPtUlq31xyaGa0Lc-2BjehLnHOkhUufXHQ8BgN1Y7qDTLpD5Dg-3D-3D11NK_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9WycN-2FihKPQUWCsWkNeiXmCLc6hDc2u-2Fd66O4Bq9dOCJdQ3mNWnJ3iu2hbLh2dK8T0087q5U6lxCLqmZ51tyS3L-2BuH5zWiNTGfKFVo-2Fe-2B9zFNSZRtT-2F9VBq-2BZXq1t-2FqK-2Bfg-3D-3D) episode, the CEO took the other side on duration. She put BBB investment-grade yields at "about 6.2%," BBs at 7% and single-Bs at 8%. She recommends "staying away from duration," adding: "keep duration as short as you can."
* *Short banks, long energy (Chris Whalen).* On [The Julia La Roche Show](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOibjAwXQhch079wl8BwiETPYyA1NMr5G5KMGeXUFJibnRd1nlFfi1iQyl2iN5TijA2eADL5vVEDeS1nW407U28TsQ-2BLAqb61xsoKcmwBMXtyQ-3D-3DbFv-_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9WxZh8XpxmdC3rV64hIeWA-2F5e2thIKGsZmZs4hvjQmnd4E3ywMpwF0uoBOnG5IyuuAZt5CGWK0EO6FGMIDbJDiLhiyh9nnFxV7ZcZjMWT9clIg-2FeKXg0rnE1DcnrLhE0GaA-3D-3D), Whalen said he "sold my Charles Schwab," trimmed Annaly to buy energy, and "put down a couple shorts on banks… which is not something I normally do." His logic: "higher prices are going to really impact consumer credit," so he "upped our exposure to energy pretty significantly… to position for the next year or two in terms of higher energy prices."

*Strategist and trader views on instruments:*

* *Long 10-year bonds beat short, with a stop at 5.50% (Alf Peccatiello).* On [The Macro Trading Floor](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgf1TCd8whfK7Y9MZKxEtuM62-2BgmIHcFZzWjax0CeUsXFj8EGsO-2FrEdxGDH366GhF4aXo8H3NSZf6FHIxpUwNULC8pCeqIhUFQHOqTzFeWq0A-3D-3DnNlm_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W9RBHIqrqVaFL-2Bd67bN15lRKa8Io5rTa-2BmpXgHeSujl-2FWhybZsGzCSGUOuTcTyWH1TxPSdzgqKa-2FR9kC1hl0VhoUS1yrHw1gc-2BwONJcaR8JueiWFzbKH35GUWhdKnD78Dg-3D-3D), Peccatiello noted the market's "median outcome… is that the Federal Reserve will raise the rate four more times in the next 12 months," with a 25% implied chance of six or more hikes, which would take rates above 2022's peak. "I think the bar is pretty high to be short bonds." He would "put a stop at 550," the 2000–2001 weekly high. His co-host Brent Donnelly is staying out of bonds ("I don't really understand what I'm looking for if I'm long bonds") but is on "high alert" to short dollar-peso, which he put in the "seventh inning" of its rally.
* *Bonds near a peak (Jim Bianco, Bianco Research).* On [The David Lin Report](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgHET8Fv-2FvgI4rHh-2FOlfIaPVomTjQRT-2FCI7kXNrM0v4jG8GGxYO6FQVJwzGh8nkK18pdjsA28o4JNcQp6PnCW2Xl8t2KGIxskiY7VpWwzLkfQ-3D-3DhQwY_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W0AfFwStIRwNciHaUTZHd9MDfCyk0gGFDN2SEuFUqX-2BpGxOjUCTzVYG8DQlNUnMVTpn-2BdqRBuitpqlW9oWtngFfHVtR43Xe4QYIUOrG4c8bqC0ZIyGdvnrPcDe4hU6Owtw-3D-3D) (September 29), Bianco, who has been "short the market and been bad-mouthing bonds since 2020," said "now at these levels, I'm actually kind of coming around to that there's some real value there." An Iran deal would bring yields down, "maybe into the high fours. But it's not going to bring them into the low fours."
* *Equities over bonds, underweight Europe (Steve Chiavarone, Federated Hermes).* On [Bloomberg Surveillance](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgmjSoCDcSIntateNbWrw0XbRoR-2FmmXDxZSXQ6KXyp1RQJcKE8MoKFEObq5NAmM8HwDQpMeTN6CU3fu8-2Bb6XQnUGpHzRRcQJOb2LwAszcKZDQ-3D-3DqERI_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9WxUXdx2oDIgulvi9mMTs4fUVZTI0ycbvDHc0UjUCcxbHwout71MW2pLR5-2FiSHi4njUFBrHvEkdPBcsRMKg7-2FJZiSM23dMgjY6wIOxxz-2FPxurAbKQbS5ZqQAlH9jSWCpzYA-3D-3D), Chiavarone said equities are "the only game in town" as long as "the risk to upside inflation is greater than the risk to downside growth." The market has gone "from a 23 times multiple to something sub-20" while earnings rose. He is underweight Europe, which "produced no magnificent name to join the Magnificent Seven."
* *Expect the yield curve to flatten (Jeff deGraaf, RenMac).* On [RenMac Off-Script](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOidk7gUmqmipVKiP0c7hgY3bw3jQjD4r9ojpQWICYAJ66eO6tTapLegZXMhhqpK7oUdBBhDYMaWPUAqLPbOR4EpM3VAbKn9jBd3gMN0p9vQsg-3D-3DkIh4_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W7uaVydkJ85UdWBKigG6BVigty8lGXVyvl1WLb9ICyEvLlxBY7zKbSzSkDO5ggc2WjNkTsgfNNl9dQ3GiPpQWWJ3cXV49ioSgHehE9mT3I6PHh5U3ez9dS-2Bi3P1y1aE0uQ-3D-3D), deGraaf said his model shows the three-month change in yields at "a 2.8 deviation," an extreme reading. Sharp moves tend to keep going for two-year yields but reverse for the 10-year, "so what does that mean? That means that the curve is going to flatten," usually within about three months.

## Read-Throughs

* *Credit: the first real cracks.* Key Private Bank's Sharma ([Key Wealth Matters](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOh8i4WCVLWDK-2Bp-2Bhpg6MfrNs2w5kWF5yIgK17SFUPOdGbd-2BiC-2BFlkaiNAlezxbR6LT0ehZ8B2m5Y0srPKeqBThLcnVnMJVidWrvXZuvkM1auQ-3D-3DoCKL_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9WxELX272vcIJIVutetgO9-2Bi3LUpR8hwspU1zcITsOcWp9GRHHWmf3Tr7AFbHAHNI6BPPAjScd4JDwsOg3qqUTsYF1fOREfAqP0ZwZprAJOl2-2FtdOzsom-2BClxnihW02ErZQ-3D-3D)) said investment-grade spreads (the extra yield over Treasuries) widened "about five basis points," "the biggest widening we've seen in a week since March." High yield is "on track for the fifth consecutive weekly loss," and CCC bonds, the riskiest tier, "had their worst weekly loss since April 2025." deGraaf ([RenMac Off-Script](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOidk7gUmqmipVKiP0c7hgY3bw3jQjD4r9ojpQWICYAJ66eO6tTapLegZXMhhqpK7oUdBBhDYMaWPUAqLPbOR4EpM3VAbKn9jBd3gMN0p9vQsg-3D-3D_Xli_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9WzvU-2FDNPW3dCGok2bQOjW2oj-2FIkDHcPSBgtqAGfLaEgEZlbccoplmr-2FejC5bRj7Mdklp8x7e-2BWajJBaOUoiPCn0JjHqUwvMf9ZPY543FeWV1JucKNI5Lxuj4z2DddlfFhg-3D-3D)) had the CCC-versus-BB gap at "about 952 basis points," though four stressed issuers make up a quarter of that market; excluding them it is about 680. "I think we're just at the cusp of that starting to happen," meaning higher rates hitting demand. Misra ([ETF Edge](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOj09RnYJfgHm6c9QYu2VewfHoZi4ecC-2BHKpEWgPhN65LmStgqyKJccYhtWz0OdPtUlq31xyaGa0Lc-2BjehLnHOkhUufXHQ8BgN1Y7qDTLpD5Dg-3D-3DjRxE_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9WyeGacWaweamKDR0IPXwl-2B9AXUEzL-2FtsglQqJK-2FUh5EeMeIFFEA154V-2F-2Bus5aIviOnWmsaMGNUC4nFni8liV0hSCJChLyrClJFerBjwGT9QbMXJ212x33a92J88uAts40w-3D-3D)) said CCC spreads "are almost a thousand over, which typically… happens in a recession," while BB and B spreads still look "fifth percentile" tight. Tech-sector investment-grade bonds are "about 25 wider on the year."
* *Consumer credit: watch the subprime lenders first.* Whalen ([The Julia La Roche Show](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOibjAwXQhch079wl8BwiETPYyA1NMr5G5KMGeXUFJibnRd1nlFfi1iQyl2iN5TijA2eADL5vVEDeS1nW407U28TsQ-2BLAqb61xsoKcmwBMXtyQ-3D-3D1PO-_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W-2BiJTECQQI0-2Ba3c5qZig5v2xJLiywJn82OeBi4rzafHfjij1PcxdTRkhUJNqNnUJVw5Hplu8L5bUijfcBN2jNr0wLDb8NGOeVxMhruYjE2OUKDCm0RGCx1F1TiNp5RfYkg-3D-3D)) said Synchrony writes off "5% of total loans every quarter," and that Synchrony, Citi and Capital One are "going to turn first… before you see it in JP Morgan." He sees "the second quarter, maybe third quarter of this year" as the low point for consumer credit quality, with defaults rising "this year and going into 2027." His read on spending: consumer-products companies report shoppers trading down to discount stores, and McDonald's "has been taking a kicking." On the pundit side, Chamath Palihapitiya on [All-In](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgKIafiDRFtPHu50SdvLri4ZM30kMqYokXyiTnXl6NvUDf1D9v25gp9WkLmLDXqUdjJ9syWwIgdurQF5-2BhrDpguDIvIokT7aUWui81cNkaxxg-3D-3DjY59_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W6K3V7-2FLuL8pLBnCQpE3LJxhaxi-2Fubk0Y5RrtMRNJqB6a2rr-2Fuggarjf-2BSrU5IrFNuQ-2Fyegwg4wU35MUu7yvDs7ol-2BFSl-2BJUb2JM8QkhdqhElKDpEqWZ-2FKyamEmGUGJvLg-3D-3D) said his own rough analysis of FDIC filings (done with ChatGPT) suggests about 95 banks could show bond-portfolio losses of "more than 20% of their equity" when September reports come out around October 30.
* *GDP: about 3% or better, with AI doing much of the work.* Moody's Marisa DiNatale ([Inside Economics](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjykNPc7o-2F2w4m-2FjPJfehFVQTMiAq-2FpJHwasF63ewD-2FGfQkGUTg7xiyy2Iwrploukez13CjUqw7mI393f1LtTzSyS-2BPb5erng2pyXp5LR-2BNXQ-3D-3DXcvs_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9Ww-2F0c64Oi7gbHWkqd5ohq-2BJGtKAc5rCteYZhhVxgcz2xr25-2BWkfCSe7IayvM-2FmCguGqDwE0MP27Pb-2B9l4WXgUZ4LzxHIKtzvpif8vw4SOt4JmkGlL3KX-2BV2ZOVoBGXoixw-3D-3D)) said benchmark revisions lifted Q1 to 2.5% (originally 1.5%) and Q2 to 2.2%, with the government statistics agency calling out "the build-out of data centers" as a main driver. Zandi said Q3 tracking estimates "are kind of coalescing around 3%." BMO ([Macro Horizons](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOi0sHhuRbfTQaKBi96hPbp39KBhiHyG6tO7-2Fp4OPUrtIdws-2FY1yBbJc6rnTqPGmbyp8Dd6vDsYslI-2Bej-2Bnm31zlvOyX69DtDIl0ad0dqg5U-2FA-3D-3DV5E__7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9WzKVIZxSuQ6O4wDbf8B24zq3ErOMBSN8pcAuAc50sCn6pMLFCDo-2B4T-2FXSZZDdcT3KQyvhP3h4BAY5XmCd8sdcAFjqqwkrvNV5Wo-2FBuVXi02fk-2Bv0WMVyjiD0-2FL-2FogYNgEg-3D-3D)) said the AI build-out contributed "roughly half of the growth that we saw in real terms during the last quarter." Its main risk is a slowdown in the pace of spending growth: AI capex "won't be a trillion dollars next year, two trillion dollars the following year, and three trillion dollars the year after." Marketplace reported a Wells Fargo estimate that AI spending accounts for about a quarter of GDP growth over the past year ([Marketplace](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhazWHKK26Qu3ehoWaJ9bcLmQE6GcWzE5os75C48UztieKzyihz1nQO8hsYZJHc4tX11VdfD3F-2BRIfX8PS9wFfzZxQf6Cl3ZWCPxsfCN8PFcQ-3D-3DWuEx_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W63vltc-2FHm2wRRr9y6UrWxa1v861xTQaXIQBZcTI7KTL0YDmkLggloKjxMZGiyo6gFEjTp-2FZOJ5DeBB-2FjoFkNyOUImOa6yW8GgNjEuQu-2Fnn4Pq-2FeiDxL-2FE-2BI3YdnrCoKvQ-3D-3D), September 30). Rebecca Patterson of the Council on Foreign Relations ([Bloomberg Surveillance](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhE8rvo2sPYUL4QmHQhz3X-2F9ntUzS1roeWdu4o8OV7bvIYnLqkx8F4V3-2FmM2SyNInQk09FTkBULwhYmAtzJJx8LXW1-2BANVjDDKRXaeu4svEOA-3D-3Dkib3_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W8TBU8qdUB7Ee6iAx2uWAlXr9Px-2BMXcL4EDuekvrE4tG-2F0T9GdWcATgz3QzW-2B8wDcTT3KIPbi3sge0FANOwq52On9DQWGTNi4SDlJdtOIngCDa9QYQ1RaaTiDK95JkYHQw-3D-3D)) cited a Brookings estimate of AI capex at "3.6 percent of GDP for about a decade" and called it "too much of a good thing": it pulls construction workers into data centers and adds "pressure higher on treasury yields because you are now competing with all that AI debt." The advance Q3 GDP estimate is due October 29.
* *Jobs and AI: growth without hiring.* ZipRecruiter economist Nicole Bachaud on [Bloomberg Surveillance](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhE8rvo2sPYUL4QmHQhz3X-2F9ntUzS1roeWdu4o8OV7bvIYnLqkx8F4V3-2FmM2SyNInQk09FTkBULwhYmAtzJJx8LXW1-2BANVjDDKRXaeu4svEOA-3D-3DBiaw_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9WwORGHMWms4Sy8Ul-2FVml-2FGv-2BXIvWLpCERr21NVsuHZiWxZngWo-2BgweCBusfTB8hZr29YNNG7adw7nYK3T9Xv4ZI1jh0wmTkAc1xXoGFOh2AkhXUbqMhxHmRentSe3xiNYw-3D-3D) said data centers "don't really take that many people to operate the facilities once they're up and running. So the overall job boost from AI is quite low." She expects "much slower job growth like the September report for the rest of the year." That is the mechanism behind the Kasman–Lupton debate.
* *Housing takes the long-rate hit.* Sharma ([Key Wealth Matters](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOh8i4WCVLWDK-2Bp-2Bhpg6MfrNs2w5kWF5yIgK17SFUPOdGbd-2BiC-2BFlkaiNAlezxbR6LT0ehZ8B2m5Y0srPKeqBThLcnVnMJVidWrvXZuvkM1auQ-3D-3Dk5Fj_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W8B4sm7kmsvoDv6jQXUuhbM6cNMUjkQR-2FqV-2FXd85YbFSRaxcc4dqHpTnRZ-2FoUqtXvItU5t9u52BHrdvJNJwpcRZLrM2GvoQFeBGC087valZFPQLXrxyUvt-2FxsryTrbu71g-3D-3D)) had 30-year mortgage rates at about 7.28%, up 25 basis points on the week, the "largest weekly jump that we've seen since October 2022" and the sixth straight weekly rise. BMO ([Macro Horizons](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOi0sHhuRbfTQaKBi96hPbp39KBhiHyG6tO7-2Fp4OPUrtIdws-2FY1yBbJc6rnTqPGmbyp8Dd6vDsYslI-2Bej-2Bnm31zlvOyX69DtDIl0ad0dqg5U-2FA-3D-3DH63A_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W1Q8E-2By55ggsY-2BexVFyHCjMg6DvBhPLsolSVC-2Br-2FaBBote0vf-2BF-2B43kwAKAaiHBV9Z0-2B4b10fBO4hBDCWb83nqAkNuYbWV6ukqhkcQxJuul6hIuaPjvAgtWDekKk-2FaIm1Q-3D-3D)) has mortgage rates "above 7.5%" and is "de-emphasizing the fixed residential investment" in its growth outlook.
* *Policy: Treasury, not just the Fed, is now a bond-market factor.* Cole ([What Bitcoin Did](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOhFGGzHqsaeFLEi5SbepjAOKmDurZqoLWYKOuqXjokf2e4E9mHABenPbZ4Vs7M1uUIXigC1WooY-2BDNbP9l9EB9MIojzd5lF-2Bs0XxugKA2Hb6g-3D-3Ddr0U_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W8UU884PAC-2BNHkjVUwB5bvVYyqNsbIfm0f-2BcuWkh-2Bn8S9jgn-2BXCR5Jqmm2k5bsGtPRWdPtMIw8ye88Lv8HeXNrXIAglxUtAq1l1JQ1ov-2BFl-2FINLnPbieTm-2BlmhSZInRzzQ-3D-3D)) said former Jefferies macro strategist David Zervos, known for supporting quiet currency debasement, was just named Bessent's deputy, and that last week's auctions were "one of the weakest bond auctions in several years." BMO flagged "a sizable increase in T-bill supply in the coming weeks." Bianco ([The David Lin Report](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgHET8Fv-2FvgI4rHh-2FOlfIaPVomTjQRT-2FCI7kXNrM0v4jG8GGxYO6FQVJwzGh8nkK18pdjsA28o4JNcQp6PnCW2Xl8t2KGIxskiY7VpWwzLkfQ-3D-3DT1QE_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9WzxW2Go-2FbWRAxwZ-2BJ8hROWFoQA9Cs4jJMM9MUoGymohtbiHqO7cafkjoZwo4eY564-2BbFVdzqtNAoM8CjIThK0fLT-2FdFyVfgtiMSztikbwtJHgcAe199KZLLb7-2F8HzvkCLQ-3D-3D)) framed Warsh's October 28 choice this way: "Hike rates on October 28th incur the wrath of the president. Don't hike rates on October 28th incur the wrath of the bond market."
* *Trade: tariffs haven't shrunk the deficit.* Schiff ([The Peter Schiff Show](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjxAtRhUmghFV9sKo5h7otuS27CuMi-2BjTKYl1nWpQKjTMWeW3Hga689qD1DfUQpjTsvB2TPMu8ngT4RsV2hhlyvdFyk4ihevvZeTyjEHxQ4wQ-3D-3Dk2mu_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W2Hraxlia8lL7Qs0nyDVX5znxp97qhXp2t4lAWBonMLzX0dozkCdZy8RIUGgwGL-2Bc8Ro-2FQPdwNfcDXt7MhsTwy7e6xyoDdPSDiJz6xtjL-2BZ7KJuVEtoArWPXhf3pjUVw3w-3D-3D)) noted August's goods trade deficit hit $132.6 billion against $114.8 billion expected, with imports up 5.5%. Outside the pre-tariff import rush of early 2025, he called it the worst on record. He also pointed to personal income rising 0.2% against 0.5% expected while spending rose 0.9%, with the savings rate down to 4.1%.
* *Cross-asset: Europe is the new stress point.* NAB ([NAB Morning Call](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOj3Upucx42hFLwyuw3RNBPaUhKMr4ON8wuCbiKos1R-2BOxRef5vkjKzV-2FXjH3o63n6ATjzV479ngn37nhwuhDQTPBU8hKIExIm3bkG-2FiQWSq2A-3D-3D-3CG_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W4weugIQFOwJRODXJAqDXj7j2sJjFKdZemQ9ylUNzNyr330utx2Lb-2B7psG68b3coQlZb4wc6NClqNNS7Sw8Xa1ESHEqkGdAkvog8NJ8JJikj7zDt6iMFo2nRpZnVwijbxA-3D-3D)) called Europe "the epicenter of the focus." French bond yields are rising on debt worries, and Spain called a snap November election over housing. Peccatiello ([The Macro Trading Floor](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOgf1TCd8whfK7Y9MZKxEtuM62-2BgmIHcFZzWjax0CeUsXFj8EGsO-2FrEdxGDH366GhF4aXo8H3NSZf6FHIxpUwNULC8pCeqIhUFQHOqTzFeWq0A-3D-3DT1DX_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W224xzwlMfcsiA-2FQBLSMriRzkpCi6LNgkesax9EQ2-2F8kbTCtuTMvcoZNQoFSH038bALe1M0e4ismmZOSC5OpBBqOWd9a8fgnvse65jvdjWyCYTtluFF6-2BRrA2um6QZCRbw-3D-3D)) said the French-German spread has broken "150 over Germany" and is "wide open." Donnelly described how a soft US inflation print got swamped by "France bonds started leaking, and then U.S. bonds just started leaking." CNBC noted the dollar index is near its highest in "17 months or so" ([Squawk on the Street](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOh1xY2Bf-2F2oedZ9C7PWkk2VaHbWcArecOgVUqbgUtzN7fhcxC77FUKSDzHqOGSG2gsEyuwpiavDyfdDcp3UxLmWcH8LKx3I7bR8t82xH4fcGg-3D-3DOlba_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbV-2BQRvDpwS6tmrPjTDfavU9oLk8tFgdsdtXIj8BPNw9W2UMFM39-2B2KlvrmGnsRK2-2FuZmI-2FXHY7ZO1hAKaieYGDnMrBlcuj-2BJZnEoMDxbmo7YO0i8DfGe4gng2ky6FxB40kOfSSU3U7i008dyjpZk1QAdwWLvnxYfy9IE-2FSAXFd0oA-3D-3D)).

## What Changed

Friday's recap ("Inflation Cooled, the Fed Blinked, the 10-Year Didn't") went out three hours before the jobs report, with consensus near 90,000 and October hike odds around 35–37%. Since then:

* *Payrolls missed badly.* 29,000 against roughly 90,000, with 60,000 cut from July and August, unemployment at 4.2% and wages up just 0.1%. Friday's issue cited ADP at 90,000 and claims at 197,000. The official count came in much weaker.
* *October hike odds roughly halved again,* from about 35% to about 17–22%, and to around 6 basis points of pricing by Monday. December stayed likely at 83–88%.
* *The 10-year set another high:* 5.30% intraday Thursday, 5.15% after payrolls, 5.28% at Friday's close, then 5.34% on Monday.
* *Credit spreads started widening.* Investment-grade spreads had their biggest weekly move since March, and CCC bonds had their worst week since April 2025. Friday's issue still described hyperscaler credit as calm.
* *The break-even debate sharpened.* Friday's issue cited a 50,000–75,000 break-even. This week's estimates ran from zero to 78,000, with the three-month average at 51,000.
* *Q3 growth estimates firmed up* at roughly 3% (Moody's) to 3.7% (Atlanta Fed GDPNow), with private domestic demand above 4%.
* *Oil was little changed, but diesel got worse.* Brent briefly dipped below $100 and was back near $102. Diesel hit about $200 a barrel, an all-time high, and the G7 announced a 100 million barrel reserve release.

---

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