The Institute for Social Research building of the University of Michigan in Ann Arbor at night, tall pale stone panels under a wide overhanging roof, with cars parked along the street in front · Dwight Burdette, via Wikimedia Commons · CC BY 3.0

Study · FIVE · 2026-10-10 · 8 min read · Rates, inflation and mortgages · World and macro

Households expect more inflation as the ten-year ends at 5.24 percent

The University of Michigan's preliminary October survey, released on Friday 9 October, put year-ahead inflation expectations at 4.7 percent and long-run ones at 3.5, both the highest since May, with sentiment at 46.3; the New York Fed's September survey had put the year-ahead median at 3.9 percent, the highest since May 2023; the Treasury's table closed the ten-year at 5.24 percent and the two-year at 4.80, both lower on the week, before a bond market holiday on Monday 12 October and September's consumer prices on Wednesday 14 October.

By the desk. Researched and written by an AI model from the sources listed at the end; nothing here restates another publication's text.

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What changed since chapter nine

Chapter nine ended on Thursday 8 October, with the thirty-year bond sold at a high yield of 5.618 percent, the Treasury's table closing the thirty-year at 5.60 percent and the ten-year at 5.22, and Freddie Mac's survey putting the 30-year mortgage rate at 7.40 percent. On Friday 9 October the Treasury's table, its one official closing reading for each day, put the ten-year at 5.24 percent, the twenty-year at 5.65, the thirty-year unchanged at 5.60 and the two-year at 4.80, from 4.75. By the desk's arithmetic the two-year rose 0.05 of a point on the day and the thirty-year not at all, so the rise was largest at the short end, and the gap between the ten-year and the two-year narrowed to 0.44 of a point from 0.47. ^{[1, 6]}

Across the week the table moved down. By the desk's arithmetic on its rows, from Friday 2 October to Friday 9 October the ten-year went from 5.28 to 5.24 percent, the thirty-year from 5.63 to 5.60, the twenty-year from 5.67 to 5.65 and the two-year from 4.83 to 4.80. The week's highest ten-year close was 5.31 percent on Monday 5 October, and the twenty-year closed above the thirty-year on every day of the week, by 0.05 of a point on Friday. ^[1]

What was new on Friday was the households' own view of prices. The University of Michigan reported that in its preliminary October survey year-ahead inflation expectations 'ticked up from 4.6% last month to 4.7% this month', and long-run expectations 'stepped up from 3.4% in September to 3.5%', both 'for the second straight month to their highest readings since May'. Two days earlier, on Wednesday 7 October, the New York Fed had reported that in its September survey 'median inflation expectations increased by 0.3 percentage point to 3.9% at the one-year-ahead horizon', 'the highest reading for the one-year-ahead inflation expectations since May 2023'. ^{[2, 3]}

The record

Michigan's table for October puts its index of consumer sentiment at 46.3, from 48.1 in September and 53.6 in October 2025; its index of current economic conditions at 44.7, from 50.9; and its index of consumer expectations at 47.3, up from 46.3. The survey's director, Joanne Hsu, wrote that sentiment was 'little changed this month, inching down a scant 1.8 index points', that 'buying conditions for durables plummeted amid high prices and borrowing costs', and that 'frustration over cost-of-living continues to mount'. She said the year-ahead reading 'substantially exceeds the 3.4% seen in February before the Iran conflict began', and that long-run expectations were 'notably higher than their 2024 range of 2.8% to 3.2%'. These are preliminary figures; the final October data are due on Friday 23 October. ^[2]

The New York Fed's survey, fielded from 1 to 30 September, said inflation expectations rose 'by 0.1 percentage point to 3.3% at the three-year-ahead horizon' and were 'unchanged at the five-year-ahead horizon at 3.0%', and that 'the difference between the 75th and 25th percentiles', its measure of how far households disagree, 'increased at all horizons'. It reported year-ahead expected price rises of 4.8 percent for gas, 5.5 percent for food, 6.8 percent for rent and 9.2 percent for medical care, and median expected growth in home prices unchanged at 3.0 percent. On credit, it said 'the net share of households reporting it is harder to get credit' increased. ^[3]

The Fed's own officials named the risk the surveys measure. Governor Christopher Waller said in Istanbul on Thursday 8 October that he was 'concerned that the recent acceleration in inflation', after more than five years above the committee's target, 'will lead consumers, investors, and price-setting businesses to revise up their expectations for future inflation'. The same Thursday in New York, Reuters reported, St. Louis Fed President Alberto Musalem said: 'To bring inflation back to target in a timely manner, more monetary policy firming will be required.' Asked about the meeting of 27 and 28 October, he said: 'I go into every meeting with a very open mind, and I haven't prejudged what the outcome of that meeting is going to be.' Reuters noted that he is not a voting member of the committee this year. ^{[4, 5]}

Musalem also spoke to the long yields this series follows. Reuters reported that he said that even with the notable rise in bond yields, 'financial conditions remain accommodative and supportive of economic growth', that the rise in yields does not signal that investors are losing confidence in the Fed, and that 'the US federal government has been on an unsustainable fiscal path now for the better part of two decades'. The Board's speech list shows Waller's address of 8 October as its newest; it lists no speech by a governor on Friday 9 October. ^{[5, 10]}

Who it reaches

The household that borrows to buy a house meets both readings at once. Freddie Mac's survey of 8 October, the newest, put the 30-year fixed rate at 7.40 percent, from 7.28 the week before and 6.30 a year earlier; its weekly history shows the rate at 6.65 percent on 20 August. Yahoo Finance reported Michigan's findings beside that figure, calling 7.4 percent 'a three-year high'. Lennar's report for the quarter to 31 August, filed on 2 October, says the 30-year rate rose to approximately 7 percent and the ten-year yield to approximately 5 percent in the quarter, that 'a significant portion of prospective buyers are finding it harder to qualify for a mortgage', and that 'near-term interest rate relief appears unlikely'. ^{[6, 7, 8, 15]}

Mortgage real estate investment trusts hold mortgage bonds bought with borrowed money. AGNC Investment, whose repurchase agreements, loans secured by its securities, 'typically have maturities of less than one year', estimated in its report for the quarter to 30 June that an instant, parallel rise of a quarter point in rates would leave its tangible net book value per share 2.3 percent lower, hedges included, and that a quarter-point widening of mortgage spreads, the extra yield mortgage bonds pay over Treasuries, would leave it 12.2 percent lower. Its report says its hedges 'are generally not designed to protect against spread risk'. Neither survey measures a spread; they measure what households expect prices to do. ^{[16, 3, 2]}

Where the sources disagree

On how to describe the sentiment reading. Michigan's director wrote that sentiment was 'little changed', down 1.8 points. Yahoo Finance reported that sentiment 'fell to 46.3' and headlined it a five-month low, and Bloomberg's headline, the page of which could not be read, was 'US Consumer Sentiment Falls to Five-Month Low in October'. The figures are the same; the words differ. The two surveys also give different year-ahead figures, 4.7 percent in Michigan's preliminary October reading and 3.9 percent in the New York Fed's September survey: they are separate surveys taken in different months, and each reports its own rise. ^{[2, 8, 9, 3]}

On whether money is tight. Musalem, as Reuters reported, called financial conditions 'accommodative and supportive of economic growth'. Michigan's director wrote that buying conditions for durables 'plummeted amid high prices and borrowing costs', and Lennar's report says higher rates and living costs 'have further strained affordability'. Reuters reported in the same story that traders broadly expect the Fed to hold its policy rate in the 3.75 to 4.00 percent range in October and that 'the Fed is now expected to deliver its next rate hike in December'; Waller, on Thursday, cited futures prices showing an 85 percent chance of at least one increase by the end of the December meeting. ^{[5, 2, 15, 4]}

What settles it next

First a pause. SIFMA, the bond dealers' trade association, confirmed its recommendation for 'a full market close on Monday, October 12, 2026' for dollar bonds in the United States, the United Kingdom and Japan for Columbus Day, adding that its recommendations 'are recommendations only'. The Fed's calendar says its daily and weekly statistical releases due that day come out on Tuesday 13 October. Then the price data: the Bureau of Labor Statistics releases the consumer price index for September at 8:30 a.m. on Wednesday 14 October, the producer price index on Thursday 15 October and import and export prices on Friday 16 October, and the Fed publishes its Beige Book, the regional banks' survey of business conditions, at 2 p.m. on Wednesday 14 October. ^{[12, 11, 13]}

Thursday 15 October brings Freddie Mac's next weekly survey, released on Thursdays at noon Eastern and covering the rates offered from the previous Thursday through Wednesday, and the Treasury's scheduled announcement of a reopening of the twenty-year bond, to be sold on Wednesday 21 October; the same day the Fed's calendar lists a conversation between Chairman Kevin Warsh and the IMF's managing director, Kristalina Georgieva, in Bangkok. Michigan's final October reading follows on Friday 23 October. The committee decides at 2 p.m. on Wednesday 28 October, with a press conference at 2:30. Chapter eleven opens on the first of these records to move the table. ^{[6, 14, 11, 2]}

Sources

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