Yield Curve Analysis – ARCTOSFX LLC

Yield Curve (Current)
3-mo	6-mo	1-yr	2-yr	5-yr	10-yr	30-yr	AaaAaa represents the highest rung of investment-grade corporate debt, indicating top-level creditworthiness and the lowest default risk. More	BaaBaa represent the lowest rung of investment-grade corporate debt with moderate credit risk, making them susceptible to higher default risk than Aaa bonds. More
4.24	4.33	4.5	4.81	4.98	5.17	5.49	6.18	6.63

Date	3-mth	6-mth	1-yr	2-yr	5-yr	10-yr	30-yr	AaaAaa represents the highest rung of investment-grade corporate debt, indicating top-level creditworthiness and the lowest default risk. More	BaaBaa represent the lowest rung of investment-grade corporate debt with moderate credit risk, making them susceptible to higher default risk than Aaa bonds. More	HY-OAS	5Y5Y5Y5Y forward rate provides a market-implied view of where policy ultimately settles once cyclical forces dissipate. Importantly, it captures the destination of policy rather than its near-term trajectory, and should be interpreted as a structural anchor rather than a tactical signal. More Forward	5Y Breakeven Inflation	MOVE Index
9/25/2026	4.24	4.33	4.50	4.81	4.98	5.17	5.49	6.18	6.63	2.93	2.34	2.34	96.00
9/18/2026	4.14	4.24	4.44	4.76	4.86	5.01	5.34	5.98	6.41	2.68	2.35	2.31	80.64
9/11/2026	4.07	4.12	4.35	4.63	4.78	4.96	5.35	6.03	6.46	2.65	2.32	2.4	82.21
9/4/2026	3.91	3.98	4.13	4.37	4.54	4.78	5.24	5.92	6.34	2.68	2.33	2.37	73.1
8/28/2026	3.90	4.02	4.15	4.34	4.48	4.73	5.22	5.86	6.27	2.60	2.32	2.3	70.97
8/21/2026	3.88	3.95	4.03	4.24	4.43	4.74	5.27	5.92	6.37	2.70	2.34	2.34	73.4
8/14/2026	3.86	3.95	3.98	4.17	4.36	4.68	5.25	5.92	6.37	2.67	2.3	2.24	69.58
8/7/2026	3.87	3.96	4.01	4.19	4.35	4.65	5.19	5.85	6.29	2.7	2.28	2.22	72.03
7/31/2026	3.83	3.98	4.08	4.28	4.45	4.75	5.27	5.96	6.38	2.84	2.3	2.26	83.02
7/24/2026	3.96	4.08	4.14	4.33	4.43	4.69	5.16	5.87	6.28	2.79	2.28	2.24	76.82
7/17/2026	3.85	3.96	4.01	4.18	4.28	4.55	5.06	5.72	6.14	2.73	2.21	2.27	70.88
7/10/2026	3.85	3.99	4.06	4.21	4.30	4.56	5.06	5.72	6.14	2.69	2.2	2.28	69.55
7/3/2026	3.82	3.98	3.96	4.14	4.23	4.49	4.98	5.6	6.02	2.74	2.22	2.24	65.4
6/26/2026	3.83	3.94	3.94	4.07	4.12	4.38	4.87	5.5	5.94	2.83	2.19	2.21	66.79
6/19/2026	3.83	3.92	4.00	4.19	4.23	4.46	4.90	5.5	5.97	2.66	2.23	2.27	65.39
6/12/2026	3.78	3.82	3.86	4.09	4.21	4.48	4.97	5.52	6.01	2.71	2.23	2.39	69.36
6/5/2026	3.78	3.81	3.88	4.17	4.29	4.55	5.01	5.53	6.06	2.76	2.24	2.48	75.2
5/29/2026	3.69	3.78	3.79	3.98	4.13	4.45	4.99	5.5	6.02	2.72	2.24	2.52	70.22
5/22/2026	3.68	3.79	3.86	4.13	4.27	4.56	5.07	5.61	6.13	2.74	2.26	2.54	78.43
5/15/2026	3.69	3.77	3.82	4.09	4.26	4.59	5.12	5.65	6.21	2.80	2.28	2.7	79.87
5/8/2026	3.69	3.74	3.75	3.90	4.02	4.38	4.95	5.47	6.03	2.81	2.28	2.62	67.25
5/1/2026	3.68	3.71	3.73	3.88	4.02	4.39	4.97	5.49	6.08	2.77	2.27	2.69	70.41
4/24/2026	3.69	3.71	3.67	3.78	3.92	4.31	4.91	5.41	6.01	2.86	2.23	2.61	66.97
4/17/2026	3.70	3.69	3.64	3.71	3.84	4.26	4.88	5.36	5.98	2.83	2.16	2.56	65.7
4/10/2026	3.69	3.72	3.70	3.81	3.94	4.31	4.91	5.42	6.03	2.94	2.14	2.58	72.15
4/3/2026	3.71	3.73	3.72	3.84	3.99	4.35	4.91	5.44	6.05	3.13	2.11	2.61	81.78
3/27/2026	3.73	3.75	3.77	3.88	4.06	4.44	4.98	5.66	6.22	3.42	2.06	2.56	111.95
3/20/2026	3.74	3.79	3.80	3.88	4.01	4.39	4.96	5.61	6.18	3.24	2.13	2.63	108.84
3/13/2026	3.72	3.70	3.66	3.73	3.87	4.28	4.90	5.60	6.11	3.28	2.11	2.61	91.17
3/6/2026	3.71	3.68	3.56	3.53	3.67	4.10	4.73	5.32	5.86	3.13	2.14	2.56	81.26
2/27/2026	3.68	3.61	3.48	3.42	3.58	4.02	4.64	5.25	5.77	3.10	2.1	2.40	73.38
2/20/2026	3.69	3.60	3.51	3.46	3.65	4.08	4.72	5.25	5.76	2.86	2.13	2.43	64.27
2/13/2026	3.68	3.59	3.42	3.40	3.61	4.04	4.69	5.31	5.81	2.95	2.12	2.42	70.1
2/6/2026	3.68	3.59	3.45	3.54	3.80	4.26	4.85	5.40	5.90	2.87	2.18	2.50	63.62
1/30/2026	3.67	3.61	3.48	3.54	3.81	4.24	4.87	5.35	5.86	2.80	2.19	2.53	59.2

Source: Federal Reserve Economic Data (FRED) is an online database created and maintained by the Research Department at the Federal Reserve Bank of St. Louis

LONG END REPRICING | CURVE STEEPENS | 10Y MOVES FURTHER ABOVE 5%

Treasury yields rose across the curve this week, but the composition of the move changed materially from the prior two weeks. The 3-month through 2-year sector increased between 5bp and 10bp, while the 5-year, 10-year and 30-year yields rose 12bp, 16bp and 15bp, respectively. The 10-year reached 5.17%, while the 30-year climbed to 5.49%. The resulting curve geometry shifted away from the recent bear-flatteningA bear flattener is a yield curve shift where short-term interest rates rise faster than long-term rates and often signals potential economic contraction or slower growth ahead. More pattern: the 10Y–3M spread widened 6bp and the 30Y–2Y spread widened 10bp, indicating renewed steepening as long-durationBond Duration: Estimates the percentage change in a bond’s price for every 1% shift in interest rates. For example, a bond with a 3-year duration will gain or lose roughly ±3% of its value if rates fall or rise by 1%. More yields began moving higher alongside the intermediate sector.

The move occurred alongside a significant deterioration in broader market conditions. HY OAS widened 25bp to 293bp, investment-grade yields rose more than 20bp, and MOVE jumped 15.36 points to 96. Inflation signals were mixed, with the 5Y5Y5Y5Y forward rate provides a market-implied view of where policy ultimately settles once cyclical forces dissipate. Importantly, it captures the destination of policy rather than its near-term trajectory, and should be interpreted as a structural anchor rather than a tactical signal. More Forward declining 1bp while the 5-year breakeven increased 3bp to 2.34%. Fed Funds Futures also became more hawkish at several medium-term meetings, particularly December and January.

Taken together, the week’s data suggest that the Treasury market is no longer repricing only the expected policy path; longer-duration risk is now demanding materially more compensation as well. That distinction matters. The prior week’s 30Y–2Y compression reflected a market willing to accept higher policy rates without proportionally repricing the long end. This week, that insulation weakened substantially.

Macro Structure: Broad Bearish Repricing with Renewed Long-End Pressure

- - - Front end:
      - 3M → 4.24% (↑ +10bp)
      - 6M → 4.33% (↑ +9bp)
      - 1Y → 4.50% (↑ +6bp)

→ The front end continued to move higher, although the magnitude of the increase moderated considerably relative to the previous two weeks.

The 3-month and 6-month maturities increased 10bp and 9bp, while the 1-year rose 6bp. This indicates that policy-sensitive yields remain elevated, but the market is no longer repricing the immediate policy horizon as aggressively as it did following the September FOMC.

The 1-year yield at 4.50% remains well above the level prevailing earlier in September, reinforcing that the market continues to expect a restrictive policy environment even as the precise timing of subsequent moves remains uncertain.

- - - Belly:
      - 2Y → 4.81% (↑ +5bp)
      - 5Y → 4.98% (↑ +12bp)

→ The belly produced a more differentiated move. The 2-year rose only 5bp, while the 5-year increased 12bp.

This is important because it suggests that the latest selloff is no longer simply about the very near-term policy rate. The 5-year’s larger increase points toward repricing of the broader medium-term rate structure.

The 5-year is now only 2bp below 5%, while the 2-year remains below the 5-year by 17bp. The market is therefore demanding considerably more yield across intermediate-duration exposure.

- - - Long end:
      - 10Y → 5.17% (↑ +16bp)
      - 30Y → 5.49% (↑ +15bp)

→ The long end was the most important development of the week.

The 10-year rose 16bp and the 30-year 15bp, bringing both maturities substantially higher despite Treasury’s expanded long-end liquidity-support buyback program.

This is materially different from last week’s configuration, when the 30-year actually declined 1bp while the 2-year surged 13bp.

The current move suggests that long-durationBond Duration: Estimates the percentage change in a bond’s price for every 1% shift in interest rates. For example, a bond with a 3-year duration will gain or lose roughly ±3% of its value if rates fall or rise by 1%. More yields are increasingly being driven by forces beyond the expected Fed policy path — including term premiumThe "extra" return investors demand for holding a long-term bond instead of a series of short-term ones. It acts as a safety buffer, compensating the lender for the increased risk that inflation or interest rates might change unexpectedly over a longer period. More, Treasury financing requirements, inflation risk and broader demand for durationBond Duration: Estimates the percentage change in a bond’s price for every 1% shift in interest rates. For example, a bond with a 3-year duration will gain or lose roughly ±3% of its value if rates fall or rise by 1%. More.

Treasury’s buybacks may improve liquidity in targeted off-the-run sectors, but they are not equivalent to monetary easing or large-scale durationBond Duration: Estimates the percentage change in a bond’s price for every 1% shift in interest rates. For example, a bond with a 3-year duration will gain or lose roughly ±3% of its value if rates fall or rise by 1%. More absorption. Treasury announced that longer-dated liquidity-support buybacks would be at least doubled to $4 billion per operation, and a September 10 operation subsequently allowed purchases of up to $6 billion in the 10Y–20Y sector.

Curve & Inflation Signals

The curve shifted decisively toward bear steepeningA bear steepener occurs when long-term rates rise faster than short-term rates and is generally associated with rising inflationary expectations. More.

- - - 10Y–3M spread: +93bp (↑ +6bp)
    - 30Y–2Y spread: +68bp (↑ +10bp)

→ The two major curve measures now point in the same direction.

The 10Y–3M spread widened 6bp, as the 10-year increased 16bp compared with a 10bp increase in the 3-month.

More importantly, the 30Y–2Y spread widened 10bp, as the 30-year increased 15bp while the 2-year rose only 5bp.

This represents a meaningful reversal from the previous week’s 58bp 30Y–2Y spread.

The market is therefore no longer simply pricing a higher policy rate while holding the long end relatively stable. Long-durationBond Duration: Estimates the percentage change in a bond’s price for every 1% shift in interest rates. For example, a bond with a 3-year duration will gain or lose roughly ±3% of its value if rates fall or rise by 1%. More yields are now participating directly in the repricing.

- - - 5Y5Y5Y5Y forward rate provides a market-implied view of where policy ultimately settles once cyclical forces dissipate. Importantly, it captures the destination of policy rather than its near-term trajectory, and should be interpreted as a structural anchor rather than a tactical signal. More Forward: 2.34% (↓ -1bp)
    - 5Y Breakeven Inflation: 2.34% (↑ +3bp)

→ Inflation signals remain mixed.

The 5-year breakeven increased 3bp, suggesting somewhat greater near- to medium-term inflation compensation. However, the 5Y5Y5Y5Y forward rate provides a market-implied view of where policy ultimately settles once cyclical forces dissipate. Importantly, it captures the destination of policy rather than its near-term trajectory, and should be interpreted as a structural anchor rather than a tactical signal. More Forward declined 1bp, indicating that longer-run inflation expectations have not moved materially higher.

The week’s long-end selloff therefore cannot be attributed solely to a renewed inflation shock. The more plausible interpretation is a combination of higher durationBond Duration: Estimates the percentage change in a bond’s price for every 1% shift in interest rates. For example, a bond with a 3-year duration will gain or lose roughly ±3% of its value if rates fall or rise by 1%. More compensation, Treasury supply/financing considerations, and a market reassessment of the longer-run rate structure, with inflation compensation providing an additional but not dominant pressure.

Fed Policy Expectations

Fed Funds Futures became more restrictive at several medium-term meetings, although the individual-meeting distributions remain uneven.

- - - October: No change increased from 45.74% to 52.30%, while +25bp declined from 39.74% to 33.09%. A −25bp cut remains around 15%.
      → The October meeting is now more heavily weighted toward no change. The market is therefore not simply extrapolating the September hike into an immediate October follow-through.
    - December: +50bp increased from 60.38% to 74.03%, while +25bp declined from 39.62% to 25.97%.
    - January 2027: +50bp increased from 34.15% to 64.15%, while +25bp declined from 51.22% to 35.85% and no change fell to zero.
    - March 2027: +50bp remains dominant at 85.37%, although this is modestly below the prior 93.62%.
    - April 2027: +50bp increased from 85.39% to 100%.
    - June 2027: +50bp remains at 100%.

→ The Fed futures curve remains structurally hawkish, but not uniformly so across individual meetings.

The key development is the shift toward a higher cumulative policy rate by December and January. At the same time, October pricing has become less aggressive.

This reinforces an important distinction: the market is repricing the expected level of policy over the medium term rather than simply assigning higher probabilities to consecutive meetings.

Credit Markets

Credit conditions deteriorated meaningfully this week.

- - - AaaAaa represents the highest rung of investment-grade corporate debt, indicating top-level creditworthiness and the lowest default risk. More: 6.18% (↑ +20bp)
    - BaaBaa represent the lowest rung of investment-grade corporate debt with moderate credit risk, making them susceptible to higher default risk than Aaa bonds. More: 6.63% (↑ +22bp)
    - Baa–AaaAaa represents the highest rung of investment-grade corporate debt, indicating top-level creditworthiness and the lowest default risk. More spread: +45bp (↑ +2bp)
    - HY OAS: 2.93% (↑ +25bp)

→ Credit provided a substantially less constructive signal than in the prior two weeks.

The 20–22bp increase in investment-grade yields reflects both the Treasury selloff and a modest increase in credit compensation, while the 25bp widening in HY OAS is more significant.

This is no longer simply a Treasury-rate story. The widening in high-yield spreads indicates that investors are beginning to demand more compensation for corporate credit risk as the rate environment becomes more restrictive.

Credit is still not signaling systemic stress, but the direction has clearly become less supportive.

MOVE Index

The ICE Bank of America U.S. Bond Market Option Volatility Estimate (MOVE) Index measures implied volatility of U.S. Treasury yields, derived from options on Treasuries (primarily 2Y–30Y maturities). It’s commonly called the “VIX for bonds”, but more precisely, it reflects the market’s expectation of how much Treasury yields will move, not bond prices. It is a critical cross-asset signal.

Bond VIX
Date	bp
1/3/2020	60.12
1/10/2020	60.12
1/17/2020	53.32
1/24/2020	49.67
1/31/2020	59.94
2/7/2020	72.98
2/14/2020	65.59
2/21/2020	62.38
2/28/2020	74.54
3/6/2020	109.67
3/13/2020	125.21
3/20/2020	138.4
3/27/2020	133.37
4/3/2020	88.33
4/10/2020	65.01
4/17/2020	74.39
4/24/2020	69.84
5/1/2020	66.09
5/8/2020	48.11
5/15/2020	57.4
5/22/2020	56.53
5/29/2020	51.67
6/5/2020	51.55
6/12/2020	61.97
6/19/2020	55.81
6/26/2020	53.45
7/3/2020	51.21
7/10/2020	50.96
7/17/2020	49.19
7/24/2020	45.68
7/31/2020	42.48
8/7/2020	41.98
8/14/2020	41.46
8/21/2020	43.09
8/28/2020	45.14
9/4/2020	48.19
9/11/2020	47.04
9/18/2020	43.12
9/25/2020	37.24
10/2/2020	36.97
10/9/2020	39.97
10/16/2020	57.52
10/23/2020	57.25
10/30/2020	58.46
11/6/2020	61.91
11/13/2020	39.88
11/20/2020	42.95
11/27/2020	42.31
12/4/2020	39.64
12/11/2020	43.89
12/18/2020	47.52
12/25/2020	44.64
1/1/2021	42.11
1/8/2021	48.98
1/15/2021	44.81
1/22/2021	45.14
1/29/2021	43.09
2/5/2021	47.41
2/12/2021	47.2
2/19/2021	47.01
2/26/2021	60.43
3/5/2021	75.66
3/12/2021	69.37
3/19/2021	70.83
3/26/2021	68.8
4/2/2021	61.49
4/9/2021	63.71
4/16/2021	61.21
4/23/2021	62.57
4/30/2021	59.98
5/7/2021	58.13
5/14/2021	54.13
5/21/2021	54.99
5/28/2021	54.59
6/4/2021	52.04
6/11/2021	49.78
6/18/2021	50.85
6/25/2021	60.45
7/2/2021	55.58
7/9/2021	52.41
7/16/2021	59.92
7/23/2021	58.24
7/30/2021	65.28
8/6/2021	61.19
8/13/2021	62.64
8/20/2021	55.45
8/27/2021	59.95
9/3/2021	57.98
9/10/2021	53.26
9/17/2021	51.73
9/24/2021	56.06
10/1/2021	58.46
10/8/2021	57.38
10/15/2021	59.65
10/22/2021	62.7
10/29/2021	72.04
11/5/2021	75.45
11/12/2021	66.9
11/19/2021	78.61
11/26/2021	73.39
12/3/2021	89.45
12/10/2021	79.14
12/17/2021	74.36
12/24/2021	72.46
12/31/2021	77.29
1/7/2022	77.1
1/14/2022	74.69
1/21/2022	76.59
1/28/2022	81.03
2/4/2022	85.29
2/11/2022	87.68
2/18/2022	94.03
2/25/2022	94.36
3/4/2022	93.34
3/11/2022	131.82
3/18/2022	99.03
3/25/2022	91.77
4/1/2022	125.27
4/8/2022	108.34
4/15/2022	124.86
4/22/2022	119.66
4/29/2022	128.12
5/6/2022	128.4
5/13/2022	121.42
5/20/2022	114.61
5/27/2022	111.1
6/3/2022	98.48
6/10/2022	97.73
6/17/2022	114.23
6/24/2022	133.75
7/1/2022	127
7/8/2022	144.17
7/15/2022	145.25
7/22/2022	129.85
7/29/2022	123.7
8/5/2022	116.36
8/12/2022	122.58
8/19/2022	106.28
8/26/2022	123.81
9/2/2022	122.95
9/9/2022	120.72
9/16/2022	121.54
9/23/2022	124.95
9/30/2022	137.28
10/7/2022	141.89
10/14/2022	148.46
10/21/2022	152.89
10/28/2022	156.95
11/4/2022	144.6
11/11/2022	128.44
11/18/2022	111.69
11/25/2022	129.33
12/2/2022	129.6
12/9/2022	118.62
12/16/2022	132.79
12/23/2022	113.65
12/30/2022	113.17
1/6/2023	121.61
1/13/2023	113.87
1/20/2023	113.55
1/27/2023	114.76
2/3/2023	100.7
2/10/2023	98.99
2/17/2023	109.63
2/24/2023	110.11
3/3/2023	122.84
3/10/2023	122.52
3/17/2023	140.06
3/24/2023	180.11
3/31/2023	173.66
4/7/2023	135.93
4/14/2023	139.2
4/21/2023	118.84
4/28/2023	120.84
5/5/2023	122.46
5/12/2023	130.21
5/19/2023	120.52
5/26/2023	127.51
6/2/2023	145.37
6/9/2023	120.95
6/16/2023	115.77
6/23/2023	104.43
6/30/2023	105.74
7/7/2023	110.64
7/14/2023	130.41
7/21/2023	112.48
7/28/2023	106.66
8/4/2023	109.76
8/11/2023	115.91
8/18/2023	112.13
8/25/2023	120.51
9/1/2023	110.37
9/8/2023	102.92
9/15/2023	104.34
9/22/2023	96.61
9/29/2023	101.11
10/6/2023	113.55
10/13/2023	126.64
10/20/2023	128.33
10/27/2023	135.45
11/3/2023	129.16
11/10/2023	118.74
11/17/2023	116.79
11/24/2023	113.11
12/1/2023	107.43
12/8/2023	111.51
12/15/2023	121.65
12/22/2023	115.75
12/29/2023	111.38
1/5/2024	114.62
1/12/2024	116.19
1/19/2024	106.51
1/26/2024	104.97
2/2/2024	100.23
2/9/2024	106.72
2/16/2024	106.21
2/23/2024	109.2
3/1/2024	108.31
3/8/2024	106.48
3/15/2024	100.88
3/22/2024	97.82
3/29/2024	91.04
4/5/2024	86.38
4/12/2024	94.31
4/19/2024	112.82
4/26/2024	111.26
5/3/2024	104.4
5/10/2024	95.96
5/17/2024	94.23
5/24/2024	89.35
5/31/2024	83.57
6/7/2024	91.14
6/14/2024	91.82
6/21/2024	100.16
6/28/2024	94.09
7/5/2024	98.59
7/12/2024	98.78
7/19/2024	86.79
7/26/2024	94.29
8/2/2024	97.76
8/9/2024	112.26
8/16/2024	108.26
8/23/2024	102.81
8/30/2024	105.63
9/6/2024	107.77
9/13/2024	107.24
9/20/2024	100.6
9/27/2024	91
10/4/2024	92.53
10/11/2024	100.15
10/18/2024	118.47
10/25/2024	123.13
11/1/2024	128.4
11/8/2024	132.58
11/15/2024	99.85
11/22/2024	102.47
11/29/2024	99.14
12/6/2024	95.22
12/13/2024	83.2
12/20/2024	85.66
12/27/2024	91.75
1/3/2025	94.8
1/10/2025	93.35
1/17/2025	96.57
1/24/2025	95.6
1/31/2025	86.75
2/7/2025	91.76
2/14/2025	93.13
2/21/2025	84.67
2/28/2025	91.83
3/7/2025	104.46
3/14/2025	104.41
3/21/2025	101.01
3/28/2025	94.54
4/4/2025	96.83
4/11/2025	125.71
4/18/2025	137.26
4/25/2025	114.64
5/2/2025	105.79
5/9/2025	101.4
5/16/2025	100.4
5/23/2025	96.7
5/30/2025	100.91
6/6/2025	92.11
6/13/2025	89.65
6/20/2025	95.31
6/27/2025	90.1
7/4/2025	87.93
7/11/2025	86.09
7/18/2025	85.48
7/25/2025	83.29
8/1/2025	82.09
8/8/2025	83.83
8/15/2025	79.2
8/22/2025	76.66
8/29/2025	78.1
9/5/2025	79.39
9/12/2025	85.29
9/19/2025	73.37
9/26/2025	72.51
10/3/2025	74.38
10/10/2025	69.53
10/17/2025	81.65
10/24/2025	78.62
10/31/2025	68.94
11/7/2025	66.61
11/14/2025	74.41
11/21/2025	79.71
11/28/2025	78.81
12/5/2025	68.95
12/12/2025	67.28
12/19/2025	69.25
12/26/2025	59.41
1/2/2026	58.5
1/9/2026	62.36
1/16/2026	61.55
1/23/2026	58.05
1/30/2026	56.25
2/6/2026	59.2
2/13/2026	63.62
2/20/2026	70.1
2/27/2026	64.27
3/6/2026	73.38
3/13/2026	81.26
3/20/2026	91.17
3/27/2026	108.84
4/3/2026	111.95
4/10/2026	81.78
4/17/2026	72.15
4./24/2026	65.7
5/1/2026	66.97
5/8/2026	70.41
5/15/2026	67.25
5/22/2026	79.87
5/29/2026	78.43
6/5/2026	70.22
6/12/2026	75.2
6/19/2026	69.36
6/26/2026	65.39
7/3/2026	66.79
7/10/2026	65.4
7/17/2026	69.55
7/24/2026	70.88
7/31/2026	76.82
8/7/2026	83.02
8/14/2026	72.03
8/21/2026	69.58
8/28/2026	73.4
9/4/2026	70.97
9/11/2026	73.1
9/18/2026	82.21
9/25/2026	80.64
10/2/2026	96

- - - Current reading: 96(↑ +15.36)
    - Leading Indicator: Rate volatility often transmits into equity volatility because discount ratesThe interest rate used to determine what a future sum of money is worth today. It accounts for the "time value of money"—the principle that a dollar today is worth more than a dollar tomorrow—and the risk that a future payment might not actually be received. More underpin asset valuations.
    - Trend: MOVE increased sharply after already moving higher earlier in September.
    - Interpretation: The 15.36-point increase is significant. Treasury volatility has now moved well beyond the relatively contained levels observed through August and early September.
      → The rate-market repricing is becoming materially less orderly. Investors are not simply accepting a new rate level; uncertainty around the interaction between Fed policy, Treasury financing, inflation and long-durationBond Duration: Estimates the percentage change in a bond’s price for every 1% shift in interest rates. For example, a bond with a 3-year duration will gain or lose roughly ±3% of its value if rates fall or rise by 1%. More demand has increased.
      
      The combination of MOVE near 100, a 5.17% 10-year yield and a 25bp widening in HY OAS is considerably more consequential than the Treasury selloff viewed in isolation.
    - Expected 10yr ranges (by timeframe):

Timeframe	Low (%)	High (%)
1 week	5.04	5.30
1 month	4.89	5.45
1 year	4.21	6.13

Impact on Equities

- - - Equity Valuation Pressure: Equity valuation conditions have become substantially more challenging.

Most Discounted-Cash-Flow (DCF) models use the 10-yr as the “risk-free” rate. So, as the rises, the present value (PV) of future cash flows declines.

Normal Equity Risk Premium (ERP): the extra return investors expect for choosing stocks over “safe” Treasuries. While earnings yields provide a baseline for expected returns, the sustainability of those returns depends heavily on the composition of nominal growth.

The “quality” of the 2025 Nominal GDP was low, as the latest release of 2025 Real GDP ^(BEA) was only 0.48%, while inflation ^{(GDP Price Deflator)} was around 3.74%. This puts Nominal GDP (2025) at 4.24%. In other words, ~88.2% of the increase in the dollar value of the economy (Nominal GDP) in 2025 was due to higher prices. If this trend continues, then the threat of stagflationAn economic anomaly characterized by the simultaneous occurrence of stagnant growth and high unemployment alongside persistent, rising inflationary pressure. More rises. With real growth subdued and inflation doing most of the work, the quality of earnings expansion becomes a key risk for equity valuations.

- - - Fixed income yields remain increasingly competitive relative to equity earnings yields
      - 10Y Treasury: 5.17%
        
        30Y Treasury: 5.49%
        
        Investment Grade Credit: 6.18% – 6.63%

→ The 10-year Treasury has moved 67bp above the 4.50% valuation threshold that represents an important line in the sand for equity discount ratesThe interest rate used to determine what a future sum of money is worth today. It accounts for the "time value of money"—the principle that a dollar today is worth more than a dollar tomorrow—and the risk that a future payment might not actually be received. More.

The significance is amplified by the fact that the long end itself is now moving higher. The previous week’s configuration allowed investors to argue that higher policy rates were largely an intermediate-duration issue. This week’s move weakens that argument.

The combination of higher long-term yields, wider credit spreadsIn the bond market, it is the difference in yield between a corporate bond and a "risk-free" government bond of the same maturity. It represents the extra interest investors demand to compensate for the risk that a company might default. More and sharply higher MOVE creates a more difficult environment for equity multiples.

→ Bottom line: Equity conditions are now materially more challenging. The 5.17% 10-year yield, 5.49% 30-year yield and 96 MOVE reading represent a meaningful tightening in the financial backdrop even without a recessionary signal.

Risk Appetite

Risk appetite weakened noticeably this week.

The clearest evidence is the 25bp widening in HY OAS, accompanied by a 2bp widening in Baa–AaaAaa represents the highest rung of investment-grade corporate debt, indicating top-level creditworthiness and the lowest default risk. More and a sharp increase in MOVE.

This is a meaningful change from last week’s configuration, when HY OAS remained relatively resilient despite higher Treasury yields.

→ Overall, risk appetite has shifted from resilient to increasingly cautious. The market is beginning to price not only higher risk-free rates but also greater compensation for credit and volatility risk.

That does not yet constitute a broad risk-off episode, but the deterioration is sufficiently large to warrant greater attention.

Growth vs. Inflation Narrative

The week’s market action is becoming more difficult to explain purely through the lens of Fed policy expectations.

The 2-year yield increased only 5bp, while the 10-year and 30-year yields rose 16bp and 15bp. That divergence suggests that the long end is increasingly responding to factors beyond the immediate policy path.

Inflation compensation provides only part of the explanation. The 5-year breakeven increased 3bp, but the 5Y5Y5Y5Y forward rate provides a market-implied view of where policy ultimately settles once cyclical forces dissipate. Importantly, it captures the destination of policy rather than its near-term trajectory, and should be interpreted as a structural anchor rather than a tactical signal. More Forward declined 1bp.

Meanwhile, credit conditions deteriorated and Treasury volatility increased sharply.

→ The most defensible interpretation is that the market is moving from a pure higher-for-longer policy repricing toward a broader repricing of durationBond Duration: Estimates the percentage change in a bond’s price for every 1% shift in interest rates. For example, a bond with a 3-year duration will gain or lose roughly ±3% of its value if rates fall or rise by 1%. More and financial conditions.

The data do not establish a recession signal. But they do indicate that investors are demanding greater compensation to hold long-durationBond Duration: Estimates the percentage change in a bond’s price for every 1% shift in interest rates. For example, a bond with a 3-year duration will gain or lose roughly ±3% of its value if rates fall or rise by 1%. More U.S. government debt at a time when Treasury financing needs, policy uncertainty and elevated rates are all interacting.

Curve Narrative

The Treasury curve underwent a meaningful reversal from bear flatteningA bear flattener is a yield curve shift where short-term interest rates rise faster than long-term rates and often signals potential economic contraction or slower growth ahead. More toward bear steepeningA bear steepener occurs when long-term rates rise faster than short-term rates and is generally associated with rising inflationary expectations. More.

The 10Y–3M spread widened 6bp to 93bp, while the 30Y–2Y spread widened 10bp to 68bp.

The contrast with last week is striking. The 30Y–2Y spread was 58bp on September 18; it is now 68bp. The 2-year rose only 5bp, while the 30-year increased 15bp.

The market is therefore no longer concentrating the rate repricing primarily in the expected policy path. Long-durationBond Duration: Estimates the percentage change in a bond’s price for every 1% shift in interest rates. For example, a bond with a 3-year duration will gain or lose roughly ±3% of its value if rates fall or rise by 1%. More yields are now rising materially alongside the belly.

The 10-year’s move to 5.17% is particularly significant. It places the benchmark well above the 5% level reached last week and indicates that the long end is no longer providing the same stabilizing influence it did during the earlier September repricing.

Treasury’s increased buyback operations provide some technical liquidity support to longer-dated off-the-run securities, but their scale is limited relative to the overall Treasury market and they do not remove the broader forces affecting long-durationBond Duration: Estimates the percentage change in a bond’s price for every 1% shift in interest rates. For example, a bond with a 3-year duration will gain or lose roughly ±3% of its value if rates fall or rise by 1%. More yields. Treasury announced that longer-dated liquidity-support operations would be at least doubled, and subsequently conducted a September 10 operation of up to $6 billion in 10Y–20Y securities.

The fact that long yields continued to rise does not by itself establish that markets lack confidence in the administration’s competence. A more defensible conclusion is that the buyback program has not been sufficient to offset the broader supply, term-premium, inflation and policy forces affecting long-durationBond Duration: Estimates the percentage change in a bond’s price for every 1% shift in interest rates. For example, a bond with a 3-year duration will gain or lose roughly ±3% of its value if rates fall or rise by 1%. More Treasuries.

The inflation data reinforce this distinction. The 5Y Breakeven increased only 3bp and the 5Y5Y5Y5Y forward rate provides a market-implied view of where policy ultimately settles once cyclical forces dissipate. Importantly, it captures the destination of policy rather than its near-term trajectory, and should be interpreted as a structural anchor rather than a tactical signal. More Forward declined 1bp. The long-end repricing therefore appears broader than a simple inflation-expectations shock.

Overall, the curve is now signaling a higher cost of durationBond Duration: Estimates the percentage change in a bond’s price for every 1% shift in interest rates. For example, a bond with a 3-year duration will gain or lose roughly ±3% of its value if rates fall or rise by 1%. More in addition to a restrictive policy environment. That is materially different from the previous week’s configuration and represents the most important development in this week’s Treasury market.

Bottom Line

This week’s Treasury market produced a significant broadening of the rate repricing, with the long end finally joining the intermediate sector in a meaningful way.

Key Themes:

- - - - 10Y rose 16bp to 5.17% and 30Y rose 15bp to 5.49%.
      - 2Y increased only 5bp, causing the 30Y–2Y spread to widen 10bp to 68bp.
      - 10Y–3M widened 6bp to 93bp, marking a shift toward bear steepeningA bear steepener occurs when long-term rates rise faster than short-term rates and is generally associated with rising inflationary expectations. More.
      - 5Y rose 12bp to 4.98%, keeping intermediate-duration rates under pressure.
      - Fed Funds Futures became more hawkish for December and January, although October became somewhat less aggressive.
      - 5Y Breakeven increased 3bp, while 5Y5Y5Y5Y forward rate provides a market-implied view of where policy ultimately settles once cyclical forces dissipate. Importantly, it captures the destination of policy rather than its near-term trajectory, and should be interpreted as a structural anchor rather than a tactical signal. More Forward declined 1bp, providing a mixed inflation signal.
      - HY OAS widened 25bp to 293bp, a significant deterioration from the prior week.
      - Baa–AaaAaa represents the highest rung of investment-grade corporate debt, indicating top-level creditworthiness and the lowest default risk. More widened 2bp, while AaaAaa represents the highest rung of investment-grade corporate debt, indicating top-level creditworthiness and the lowest default risk. More and BaaBaa represent the lowest rung of investment-grade corporate debt with moderate credit risk, making them susceptible to higher default risk than Aaa bonds. More yields increased 20bp and 22bp.
      - MOVE surged 15.36 points to 96, indicating a materially more volatile Treasury market.
      - The 10-year at 5.17% is now 67bp above the 4.50% equity valuation threshold.

→ Overall, the week’s data suggest that the Treasury market is entering a different phase of the repricing. Earlier in September, the dominant message was higher-for-longer Fed policy with the long end relatively contained. This week, the long end has begun to participate materially, producing a broader increase in the cost of durationBond Duration: Estimates the percentage change in a bond’s price for every 1% shift in interest rates. For example, a bond with a 3-year duration will gain or lose roughly ±3% of its value if rates fall or rise by 1%. More.

The key question is no longer simply how restrictive the Fed will be. It is whether the combination of higher policy rates, Treasury financing requirements, term premiumThe "extra" return investors demand for holding a long-term bond instead of a series of short-term ones. It acts as a safety buffer, compensating the lender for the increased risk that inflation or interest rates might change unexpectedly over a longer period. More, and deteriorating credit/volatility conditions is establishing a higher equilibrium cost of capital across the entire curve.

The 10-year at 5.17%, 30-year at 5.49%, HY OAS at 293bp, and MOVE at 96 make that question substantially more consequential than it was only a few weeks ago.

Yield Curve Summary

Metric	(bp)	Comment
2yr - 3mo	+57	Terminal rateThe ultimate peak or trough interest rate targeted by a central bank before halting a monetary policy cycle, marking the point where policy is deemed sufficiently restrictive to curb inflation or accommodative to spur growth. More might have been reached.
10yr - 3mo	+93	Long-term inflation persistence worries replacing recessionary risk worries.
10yr - 2yr	+36	Fairly robust signal of economic "normalization"
AaaAaa represents the highest rung of investment-grade corporate debt, indicating top-level creditworthiness and the lowest default risk. More - 10yr	+101	healthy, standard spread for top-tier credit, indicating no signs of stress in the plumbing of the financial system.
HY-OAS	+293	credit markets are not pricing in meaningful default risk or recession stress
MOVE Index	+96	Rate volatility is picking up
5Y5Y Forward Rate5Y5Y forward rate provides a market-implied view of where policy ultimately settles once cyclical forces dissipate. Importantly, it captures the destination of policy rather than its near-term trajectory, and should be interpreted as a structural anchor rather than a tactical signal. More	2.34%	Fed policy remains restrictive relative to its longer-run equilibrium.
5Y Breakeven Inflation Rate	2.34%	Inflation expectations remain somewhat above target