Five Percent Is Back
September 28, 2026
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The story last week was not stocks — it was the level of yields. The 10-year Treasury closed Friday at 5.18%, its highest close since July 2007, up from 4.998% a week earlier, while the 30-year reached 5.50%,1 a post-2004 peak.2 Nearly every benchmark maturity now trades near or above 5%.3
What drove the move matters more than the move itself. The September flash S&P Global Composite Purchasing Managers' Index (PMI) jumped to 58.4, a 62-month high, with employment growth the fastest since June 2022, backlogs building at the sharpest pace since May 2022 and input-cost inflation the highest since October 2022.4 Headline durable goods orders were flat but firmer excluding transportation.5 This appears to reflect a growth repricing, not an inflation scare: of the 20-basis-point (bp) rise in the 5-year yield, 18 bps came from higher real yields.6 Federal Reserve (Fed) officials reinforced it — Governor Michael Barr said "further policy adjustments are likely to be needed," and New York Fed President John Williams called another hike this year "a reasonable way to think about it."7 October hike odds moved to roughly 64%.8
Supply is the other half of the equation. Wednesday's 5-year auction tailed 3 bps and priced above 5% for the first time since 2007, while Thursday's 7-year auction tailed by nearly 1 bp and priced at its highest yield since the maturity was reintroduced in 2009.9 With a record $40 trillion debt load and deficits still widening, weak auction results suggest investors want to be paid more to absorb duration.10 The move is global — Japanese government bond yields hit levels last seen in 1996.11
Equities shrugged off the move. For the week, the Nasdaq Composite Index rose 2.1%, the S&P 500 Index gained 1.2% and the Dow Jones Industrial Average added 0.3%, snapping a three-week losing streak, helped by West Texas Intermediate crude falling to roughly $92 on reports of a possible deal to reopen the Strait of Hormuz.12 Beneath the surface, however, breadth was poor: the Russell 2000 Index fell 0.8%, utilities dropped 3.9% and real estate lost 2.3%.13 Rate-sensitive assets are telling a different story than the indexes.
The week ahead brings a heavy slate of data into quarter-end. The Job Openings and Labor Turnover Survey (JOLTS) and consumer confidence reports are due on Tuesday.14 Wednesday brings August personal income and outlays, including the core personal consumption expenditures (PCE) price index plus the third estimate of second-quarter gross domestic product.15 The Institute for Supply Management (ISM) Manufacturing PMI is slated for Thursday, and the September employment report follows on Friday.16
For investors, higher real yields driven by stronger growth represent a fundamentally different regime than 2022's inflation shock, and a potentially more attractive entry point. With yields near or above 5% across much of the curve, the asset class is arguably being paid to wait. A stronger-than-expected payroll report on Friday could put an October hike firmly in play and push rates higher still.
Sources:
1,13Portfolio Terminal – Stock Market Close September 25, 2026; 9/26/26
2,8CNBC – Dow jumps more than 470 points Friday; stocks notch winning week despite Treasury yield surge; 9/25/26
3,6,7,9-11Washington Trust – Fixed Income & Equities Markets Week in Review; 9/25/26
4,5Stock Rover – Rover's Weekly Market Brief; 9/25/26
12Investopedia – Markets News; 9/25/26
14-16MarketWatch – Economic Calendar; as of 9/28/26
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