- The 10-year Treasury yield ended Wednesday at 5%, little changed after the Fed’s decision to hold rates steady, while the two-year yield stood at 4.691%, leaving the 2s-10s curve about 31 basis points positively sloped (Lumida calculation).
- Front-end yields reflect a Fed that may not be done. The one-year yield is 4.482%, the six-month 4.334%, the three-month 4.109% and the one-month 3.98%, and DoubleLine’s Jeffrey Gundlach told CNBC his “base case is probably a hike in December.”
- Thursday brings a heavy data slate. The Dow Jones consensus calls for September PCE prices to rise 0.5% on the month and 3.7% from a year earlier, consumer spending to increase 0.6%, personal income to gain 0.3% and initial jobless claims of 200,000.
- Income is on offer in credit. The iShares iBoxx High Yield Corporate Bond ETF yields 6.06%, the State Street SPDR Bloomberg High Yield Bond ETF 6.79%, the iShares 0-5 Year High Yield Corporate Bond ETF 7.13% and the Fidelity Corporate Bond ETF 4.8%.
What Happened?
Treasury Secretary Scott Bessent and Gundlach both spoke on CNBC Wednesday after the Fed decision. Bessent played down concerns about AI-related debt, saying deals are still getting done and that companies like Meta are choosing to finance with equity. Gundlach warned that the market “isn’t accepting the ratings” on some AI-adjacent businesses, comparing the behavior to triple-B subprime.
Why It Matters?
A 5% 10-year yield raises the hurdle for stocks, mortgages and the debt-financed AI build-out at the same time. With the Fed holding but not ruling out more hikes, Thursday’s PCE figure, the Fed’s preferred inflation gauge, could move rate expectations and the long end of the curve.
What’s Next?
Watch whether PCE meets the 3.7% consensus and how two-year yields react, as they are most sensitive to December hike odds. Caterpillar, Merck, Amazon and Intel also report Thursday, adding earnings risk on top of the macro data.
Affected Tickers and Coins: TLT, HYG, JNK, SHYG, FCOR
Source: CNBC
