Duration & Credit Pulse
Executive Summary
Bottom Line: The September 2026 jobs report showed payrolls rising 29,000 against a 90,000 consensus, with the unemployment rate at 4.2%, and it reinforced Federal Reserve guidance against a rate increase in October. Most of the week's curve steepening preceded the report: the 2-year yield declined 14bp from Monday to Thursday as Fed officials signaled patience, while long-end yields rose. On the week, the 2-year declined 3bp to 4.83%, the 10-year rose 11bp to 5.27% and the 30-year rose 13bp to 5.62%, a twist steepener that widened the 2s10s spread 14bp to 45bp. High yield spreads widened 8bp to 302bp under heavy new issuance. With $119 billion of coupon auctions due in the coming week, the central question is whether supply and real yields, rather than the policy path, continue to set long-end yields.
Duration Dashboard: Treasury Yields After the September 2026 Jobs Report
| Maturity | September 27, 2026 | October 4, 2026 | Weekly Δ | 5-Year Percentile |
|---|---|---|---|---|
| 2‑Year | 4.85% | 4.83% | -3 bp | 88th %ile (elevated) |
| 5‑Year | 4.99% | 5.05% | +7 bp | 99th %ile (extreme) |
| 10‑Year | 5.16% | 5.27% | +11 bp | 99th %ile (extreme) |
| 30‑Year | 5.49% | 5.62% | +13 bp | 99th %ile (extreme) |
Weekend dates carry Friday closes (September 25 and October 2). Percentiles use a trailing 1,260-trading-day window. The 5-year, 10-year and 30-year closes rank above 99.7% of observations and are shown as 99th rather than 100th because each set a five-year closing high on September 30 (5.09%, 5.29% and 5.63%) and finished Friday 1–3bp below it.
Curve Steepens as the Front End Prices Out October
Curve Analysis: The curve twisted steeper. The 2-year yield declined 3bp while the 5-year rose 7bp, the 10-year 11bp and the 30-year 13bp. The 2s10s spread widened 14bp to 45bp, holding near Thursday's close, which was the widest since late August, and the 2s30s spread widened 15bp to 79bp (spreads are calculated from unrounded closes). The 2-year closed at 4.93% on Monday, its highest close since May 2024, then declined 14bp through Thursday as Federal Reserve officials leaned against an October move.
Monday set the tone. Brent crude traded above $107 a barrel after President Trump rejected Iran's proposal to reopen the Strait of Hormuz, and Treasury yields rose 5–8bp across the curve. The 30-year yield rose each day through Wednesday, when the 5-year (5.09%), 10-year (5.29%) and 30-year (5.63%) each set five-year closing highs. On Thursday the 10-year touched 5.34% intraday, its highest level since 2002, before closing at 5.24%. The September 2026 jobs report on Friday did not produce a rally: yields closed 1–4bp higher across the curve, with the 10-year at 5.27% and the 30-year at 5.62%. The move extends the pattern described in last week's report on the 30-year's five-year high, when the long bond closed at 5.49%.
Real yields carried most of the increase. On the Federal Reserve's H.15 constant-maturity series, the 10-year TIPS yield rose from 2.83% on September 25 to 2.93% on September 30 and stood at 2.88% on October 1. Over those four sessions the nominal 10-year constant-maturity yield rose 7bp, so roughly 5bp of the increase came from real yields rather than inflation compensation. That mix is consistent with supply and term premium, rather than inflation compensation, as the main influence at the long end, though real yields alone cannot separate term premium from a higher expected policy path.
Credit Pulse
| Metric | September 27, 2026 | October 4, 2026 | Weekly Δ | 5-Year Percentile |
|---|---|---|---|---|
| IG OAS | 80 bp | 81 bp | +1 bp | 35th %ile (middle range) |
| HY OAS | 294 bp | 302 bp | +8 bp | 37th %ile (middle range) |
| VIX Index | 14.87 | 15.31 | +0.44 | 26th %ile (middle range) |
High yield spreads widened 8bp to 302bp, the widest weekly close since late March, and reached 310bp on Thursday before narrowing 8bp on Friday. Investment grade spreads were little changed, 1bp wider at 81bp after closing at 83bp on Tuesday. Both sit in the lower-middle of their five-year ranges, at the 37th and 35th percentiles. The VIX rose 0.44 points to 15.31 after closing at 16.39 on Thursday.
Primary supply appears to have been the main driver. Paramount Skydance brought $30 billion of investment grade bonds in eight tranches and $11.4 billion of dollar high yield bonds in three tranches, plus an €885 million euro tranche, to fund its acquisition of Warner Bros. Discovery. Spreads on all eight investment grade tranches narrowed from initial guidance, yet three were expected to yield at least 8% and the 10-year high yield note was marketed near 9.13%. High yield issuance had reached $38.51 billion for September by the start of the week, already the busiest month of 2026, and Goldman Sachs credit strategist Amanda Lynam described a market "bracing for the same sort of episodic indigestion" seen in investment grade earlier in the summer.
Through Thursday, lower-quality credit repriced more than the broad market. The ICE BofA CCC & Lower OAS, a different series from the dashboard index, widened 87bp from 1,128bp on September 25 to 1,215bp on October 1, against 16bp for the dashboard high yield index over the same sessions. Fund flows favored government funds over credit. LSEG Lipper data for the week to September 30 recorded $6.45 billion of net inflows to US bond funds, including $4.3 billion into short-to-intermediate government and Treasury funds, alongside $2.28 billion of withdrawals from short-to-intermediate investment grade funds.
US Macroeconomic Assessment – September 2026 Jobs Report Shows a 29K Payroll Gain
The September 2026 jobs report closed a week in which labor indicators diverged. Payroll growth slowed and prior months were revised lower, while jobless claims stayed low and the ADP estimate of private payrolls improved. Inflation data were mixed as well: consumer price measures came in below expectations, and manufacturers reported higher input costs.
Payroll growth slows: Nonfarm payrolls rose 29,000 in September against a Reuters consensus of 90,000. July was revised to −10,000 from +21,000 and August to +133,000 from +162,000, a combined 60,000 reduction that leaves the three-month average near 51,000. The unemployment rate rose to 4.2% from 4.1%. Average hourly earnings rose 0.1% on the month and 3.0% from a year earlier. Health care (+17,000), construction (+11,000) and manufacturing (+9,000) added jobs, and financial activities declined 7,000. A below-consensus payroll gain in a week of higher long-end yields also featured in our June 2026 jobs report, which covered a payroll miss and a bear steepening.
Other labor data were mixed: Initial jobless claims declined to 197,000 in the week ended September 26, the lowest since July, and continuing claims of 1.7 million were the lowest since March 2023. ADP reported a 90,000 gain in private payrolls against a 68,000 consensus. Job openings were 7.1 million in August, with July revised up to 7.3 million, and the quits rate was 1.9%. Household sentiment was weaker: the Conference Board index declined 6.7 points to 81.9, below the 89.2 consensus and the lowest reading since 2014.
Inflation: softer consumer prices, firmer input costs: The August PCE price index rose 0.3% on the month and 3.4% from a year earlier, below consensus of 0.4% and 3.7%. Core PCE rose 0.2% and 3.0%, against expectations of 0.3% and 3.3%. Benchmark revisions lowered July's annual rates to the same 3.4% and 3.0%, so the year-over-year pace was unchanged. Real consumer spending rose 0.6% and the saving rate was 4.1%. The ISM Manufacturing PMI was 54.5, below the 55.0 consensus, while its prices index rose to 77.9 from 71.1, an indication that input-cost pressure has not eased.
| Release | Date | Actual | Consensus | Prior |
|---|---|---|---|---|
| Nonfarm payrolls (Sep) | Oct 2 | +29K | +90K | +133K (revised) |
| Unemployment rate (Sep) | Oct 2 | 4.2% | n/a | 4.1% |
| ISM Manufacturing PMI (Sep) | Oct 1 | 54.5 | 55.0 | 54.6 |
| ISM prices index (Sep) | Oct 1 | 77.9 | n/a | 71.1 |
| Initial jobless claims | Oct 1 | 197K | n/a | 198K (revised) |
| PCE price index, y/y (Aug) | Sep 30 | 3.4% | 3.7% | 3.4% (revised) |
| Core PCE, y/y (Aug) | Sep 30 | 3.0% | 3.3% | 3.0% (revised) |
| ADP private payrolls (Sep) | Sep 30 | +90K | +68K | +36K (revised) |
| JOLTS job openings (Aug) | Sep 29 | 7.1M | n/a | 7.3M (revised) |
| Conference Board confidence (Sep) | Sep 29 | 81.9 | 89.2 | 88.6 |
Energy and fiscal backdrop: Brent crude ended the week near $102 a barrel after G7 governments agreed to release up to 100 million barrels of crude and diesel stocks over four months. Federal funding runs through December 11 under the continuing resolution signed in September, so data releases arrived on schedule.
Federal Reserve Policy Outlook
The federal funds target range is 3.75%–4.00% following the 25bp increase on September 16, the subject of our September FOMC report. Officials used the week to separate the direction of policy from its timing. New York Fed President John Williams said Tuesday there is "no need for urgency" and that "one further upward adjustment" may be appropriate late this year. Vice Chair Philip Jefferson said Thursday that he and his colleagues "will need to come to our own judgment, which may take more time." Minneapolis Fed President Neel Kashkari said he did not "have a strong view" on October.
Dallas Fed President Lorie Logan offered the firmer view, stating that the target range "needs to rise an additional 50 basis points or more" and that strong growth and consumer spending indicate policy is not restrictive. Market pricing followed the more patient officials. The implied probability of an October increase declined from roughly 70% early in the week to about 25% by Thursday, according to Reuters, and was still about one-in-four after Friday's payroll data. A December move remains widely expected; JPMorgan's Michael Feroli said "it would now take a very strong CPI to make the October meeting live." The September CPI on October 14 is the next major inflation release ahead of the October 27–28 meeting.
Week Ahead: FOMC Minutes and $119 Billion of Treasury Supply
- ISM Services PMI (Monday, October 5): Consensus is 55.1. The release offers the first read on services activity and prices since the manufacturing prices index rose to 77.9.
- 3-Year Auction and Trade Balance (Tuesday, October 6): Treasury sells $58 billion of 3-year notes. The August trade balance is forecast at −$95.2 billion. Governor Michelle Bowman is scheduled to speak.
- 10-Year Reopening and FOMC Minutes (Wednesday, October 7): The $39 billion 10-year reopening prices at 1:00 PM ET, followed at 2:00 PM ET by minutes of the September 15–16 meeting, which should show how broad support was for further increases. St. Louis Fed President Alberto Musalem is scheduled to speak.
- 30-Year Reopening and Jobless Claims (Thursday, October 8): The $22 billion 30-year reopening is the main test of long-end demand. Initial claims are forecast at 200,000.
- University of Michigan Sentiment (Friday, October 9): The preliminary October reading is forecast at 47.6, with inflation expectations in focus. Boston Fed President Susan Collins is scheduled to speak.
- Timing note: The bond market is closed Monday, October 12, for Columbus Day. The September CPI follows on Wednesday, October 14.
US Economic Positioning and Global Context
The rise in long-end Treasury yields was part of a broader repricing of long-dated government debt. The UK 30-year gilt yield rose above 6% on October 1 for the first time since 1998. Higher long-dated yields abroad add competition for duration buyers in a week with 10-year and 30-year Treasury auctions.
US equities were mixed. The S&P 500 declined 0.27% on the week to 7,722.72, the Dow declined 1.26% and the Nasdaq Composite rose 0.45%. Oil remains the main external variable for inflation expectations: Brent above $100 keeps headline inflation risk in place even as core PCE holds at 3.0%.
Key Articles of the Week
-
Prior Week's Report – Treasury Yields September 2026: 30-Year Sets Five-Year High at 5.49%Mariemont Capital, Duration & Credit PulseSeptember 27, 2026Read Report
-
The Employment Situation – September 2026U.S. Bureau of Labor StatisticsOctober 2, 2026Read Article
-
Fed May Skip October but Pull U.S. Rate Hike Trigger in DecemberReuters (via BNN Bloomberg)October 2, 2026Read Article
-
Fed Policymakers Lean Against October Rate HikeReuters (via Yahoo Finance)October 1, 2026Read Article
-
Opening Remarks for Moderated Conversation at Voices of the Eleventh District (Lorie Logan)Federal Reserve Bank of DallasOctober 1, 2026Read Article
-
U.S. 10-Year Treasury Yield Hits Highest Level Since 2002QuartzOctober 1, 2026Read Article
-
Personal Income and Outlays, August 2026U.S. Bureau of Economic AnalysisSeptember 30, 2026Read Article
-
Paramount Skydance Tightens Spreads on $30 Billion Bond SaleQuartz (via Yahoo Finance)September 30, 2026Read Article
-
Oil Prices Surge After Trump Rejects Iran's Plan to Reopen Strait of HormuzAl JazeeraSeptember 28, 2026Read Article
Frequently Asked Questions: September 2026 Jobs Report and Treasury Yields
What did the September 2026 jobs report show?
Nonfarm payrolls rose 29,000 in September, below the 90,000 consensus, and the unemployment rate rose to 4.2% from 4.1%. Revisions lowered July and August by a combined 60,000 jobs. Average hourly earnings rose 0.1% on the month and 3.0% from a year earlier, pointing to slower hiring without a sharp rise in layoffs.
Why did Treasury yields rise after a weak jobs report?
The weekly rise at the long end reflected supply and real yields more than the Fed path. The 2-year yield declined 3bp on the week as October hike pricing faded before the report, while the 10-year rose 11bp to 5.27% and the 30-year 13bp to 5.62%. On Friday itself, yields closed 1–4bp higher.
How did credit spreads move this week?
High yield spreads widened 8bp to 302bp and investment grade spreads widened 1bp to 81bp, both in the lower-middle of their five-year ranges. Heavy issuance, including Paramount Skydance's $30 billion investment grade and $11.4 billion high yield offerings, appears to have been the main driver. Lower-rated CCC spreads widened more than the broad index through Thursday.
What is the Fed expected to do at its October 2026 meeting?
Markets expect the Fed to hold the target range at 3.75%–4.00% on October 28. The implied probability of an increase declined from roughly 70% to about 25% during the week after officials including John Williams and Philip Jefferson signaled patience. A December increase remains widely expected, with September CPI due October 14.
Earlier editions are available in the Duration & Credit Pulse archive.
