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Study · FIVE · 2026-10-06 · 8 min read · Treasuries, the Fed and housing finance · World and macro

Ten-year closes at 5.31 percent, its highest since May 2002

The Treasury's table puts the ten-year at 5.31 percent on Monday 5 October, its highest close since 14 May 2002, and the thirty-year at 5.66, the highest in the table since July 2001, on the day the services survey's prices index reached 74.0, its highest since July 2022; Reuters reports investors see roughly a 24 percent chance of a Fed increase in October, and the Treasury sells $58 billion of three-year notes, $39 billion of ten-year notes and $22 billion of thirty-year bonds from Tuesday to Thursday.

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

AGNCadjacent NLYadjacent LENadjacent RKTadjacent JPMadjacent

What changed since chapter five

Chapter five ended on Thursday's table, with the ten-year at 5.24 percent, and on Friday's jobs report, in which employers 'added 29,000 more jobs to their payrolls than they cut last month', as the Associated Press put it. The yield did not stay down. The AP reported that the ten-year 'briefly dropped all the way below 5.17 per cent' after the report and that 'as oil prices pared their losses through Friday, so did Treasury yields'; the Treasury's close for Friday 2 October is 5.28 percent. Monday's table reads: two-year 4.84 percent, three-year 4.97, five-year 5.06, seven-year 5.19, ten-year 5.31, twenty-year 5.70, thirty-year 5.66. ^{[1, 17]}

The Treasury's back tables date those levels. No ten-year close had been as high since 14 May 2002, when it was 5.32 percent. The twenty-year's 5.70 is its highest close since 11 June 2002, at 5.71. The thirty-year's 5.66 is the highest in the table since 11 July 2001, at 5.69, with a gap: the Treasury stopped publishing a thirty-year rate on 18 February 2002 and resumed it on 9 February 2006, the years in which it did not issue thirty-year bonds. The short end stayed below its September high: the two-year's 4.84 is under the 4.92 of Monday 28 September. ^{[1, 2, 3, 4]}

Monday's other record was the Institute for Supply Management's survey of purchasing and supply executives in services for September. Its main index was 54.9 percent, half a point below August's 55.4 and the 27th month in a row above 50; by the institute's own rule, a reading above 50 percent means the services economy is 'generally expanding'. Its prices index was 74.0 percent, 1.4 points above August and the highest since July 2022, when it stood at 74.5. Behind that number, 50.3 percent of the respondents reported paying more for materials and services, 2.2 percent paid less and the rest the same; seventeen industries reported paying more and none less. ^{[5, 16]}

The odds of another increase came down after the jobs report. On Friday the AP wrote that traders saw 'less than a 23 per cent probability' of a Fed increase at the meeting later in October, 'down from 64 per cent a week ago, according to data from CME Group'. On Monday Reuters reported: 'Investors see a roughly 24% chance of a Fed rate increase this month, down from 64% a week ago, according to CME FedWatch data, though a move in December remains largely priced in.' ^{[17, 18]}

The record

The rate in question was set on Wednesday 16 September, at the end of a two-day meeting, when the Federal Open Market Committee raised the target range for the federal funds rate, the Fed's main interest rate, 'by 1/4 percentage point to 3-3/4 to 4 percent' by a vote of 12 to 0, and said: 'Inflation remains elevated.' The Federal Reserve's chairman is Kevin Warsh. Every yield on Monday's table is above the top of that range, from 4.05 percent at one month. The minutes of the September meeting, the committee's written account of its discussion, are scheduled for 2 p.m. on Wednesday 7 October, and the next decision for 2 p.m. on Wednesday 28 October, at the end of a meeting that opens on 27 October. ^{[6, 7, 16, 1]}

The services survey's other lines: business activity 56.5 percent, 5.2 points below August; new orders 59.8; employment 50.1, above 50 for the first time in three months. Steve Miller, who chairs the institute's services survey committee, said tariffs and fuel costs were the issues respondents cited most, and that 'fuel costs were mentioned twice as often as any other single issue impacting performance'. A respondent in construction wrote: 'Interest rates continue to drive buyers out of the market. Half of buyers walking through the door cannot qualify to purchase.' Among the comments on business activity was another: 'Home sales are slowing as mortgage rates increase and inventory shrinks.' ^[5]

The Treasury sells three issues this week, by its announcements of Thursday 1 October: $58 billion of new three-year notes on Tuesday 6 October; $39 billion more of the ten-year note first sold in August, which pays interest of 4-5/8 percent a year, on Wednesday 7 October; and $22 billion more of the August thirty-year bond, paying 5-1/8 percent, on Thursday 8 October. Competitive bids close at 1 p.m. Eastern each day. All three settle on 15 October, when the Treasury estimates that $86.4 billion of its notes and bonds held by the public mature; the three sales come to $119 billion, $32.6 billion more than that, by the desk's arithmetic. Monday's table has both the ten-year and the thirty-year yielding more than the interest those two securities pay. ^{[8, 1]}

The mortgage rate this series follows was last read on Thursday 1 October: Freddie Mac's survey put the 30-year fixed rate at 7.28 percent, from 7.03 a week earlier and 6.34 a year earlier. The survey averages the rates offered on applications from Thursday through Wednesday, so its next reading, at noon on Thursday 8 October, covers the week that includes Monday's table. ^[10]

Who it reaches

Mortgage real estate investment trusts, which hold mortgage bonds bought with borrowed money, state their path in their reports for the quarter to 30 June. AGNC Investment funds itself 'primarily through collateralized borrowings structured as repurchase agreements', loans secured by the securities it holds that 'typically have maturities of less than one year', and says its liquidity risk 'principally arises from financing long-term fixed rate assets with shorter-term variable rate borrowings'. Annaly says 'a significant portion of our investments are financed with repurchase agreements'. Each estimated, as of 30 June, when the Treasury's ten-year stood at 4.44 percent, what an instant half-point rise across the curve would do, hedges included: AGNC's tangible net book value per share, a measure of what its holdings are worth after its debts, 5.3 percent lower; Annaly's book value 2.2 percent lower, and its economic net interest income, the company's own measure of interest earned less interest paid, 2.9 percent lower over twelve months. AGNC adds that its hedges 'are generally not designed to protect against spread risk', the risk that mortgage yields move away from Treasury yields. ^{[11, 12, 1]}

Builders and lenders meet the same rates through the mortgage. Lennar's quarterly report, filed on Friday 2 October, says 'mortgage interest rates moved higher during the quarter' and that 'a significant portion of prospective buyers are finding it harder to qualify for a mortgage'; it continues 'to offer incentives intended to maintain volume and affordability'. Rocket Companies' report for the quarter to 30 June says elevated mortgage rates and affordability 'weighed on purchase and refinance activity'. The same rise in rates worked the other way on its servicing book, the fees it earns for handling borrowers' payments: Rocket says the value its models put on its servicing rights and related liabilities went up $70 million in the quarter, a change 'driven by an increase in interest rates', and that it was 'mostly offset' by its hedges. ^{[13, 14]}

For a bank, one measure is net interest income, what it earns on loans and securities less what it pays on deposits and debt. JPMorgan Chase's report for the quarter to 30 June estimates that long-term rates one point higher with short-term rates unchanged, what it calls a 'steeper yield curve', would add $1.1 billion to its net interest income and certain fees over the following twelve months, against $1.8 billion if rates across the curve were one point higher. Monday's curve is steeper than on 30 June: the ten-year stands 0.47 of a point above the two-year, from 0.30 then, by the desk's arithmetic. The services survey heard the cost side from a respondent in finance and insurance: 'Increased competition for deposits and higher funding costs are placing pressure on profitability'. ^{[15, 1, 5]}

Where the sources disagree

On the level. The AP reported that the ten-year 'almost got to 5.35 per cent earlier in the day' and is 'near its highest level since 2002'. An earlier version of Reuters' market report, carried by The Spokesman-Review, said the benchmark yield 'jumped 6.8 basis points to 5.34%'; the later version, carried by Euronext, says it 'rose 3.4 basis points to 5.31%' (a basis point is a hundredth of a percentage point). The Treasury's table, which has 5.31, is built from 'closing market bid prices' that the New York Fed obtains 'at approximately 3:30 PM', so a level touched earlier in the day does not enter it. By the tables, no ten-year close has reached 5.35 since 2 April 2002, when it was 5.36. ^{[16, 19, 18, 4, 2]}

On the cause. CNBC's headline on Monday said surging Treasury yields don't signal a U.S. 'fiscal apocalypse', adding 'yet'. Reuters wrote that borrowing costs across major economies remain near multiyear highs 'as deteriorating public finances, heavy debt issuance and elevated energy prices continue to pressure bond markets'. The AP put Monday's rise on 'worries about high oil prices' and on 'the strength of the U.S. economy', and wrote on Friday that 'concerns about big spending by governments, along with the mountains of debt they're racking up' keep yields high around the world. Lennar's report says the rise in mortgage rates 'was driven in significant part by inflation associated with energy prices tied to the ongoing geopolitical tension with Iran', and the services survey's respondents mentioned fuel costs more than any other issue. ^{[20, 18, 16, 17, 13, 5]}

On the Fed. The same Reuters report gave two numbers on one day: the earlier version said investors 'now see an 18% chance' of an increase this month, the later one 'a roughly 24% chance', both against 64 percent a week before and both by CME FedWatch data. Both versions said a December move 'remains largely priced in', and the AP wrote that 'the general expectation on Wall Street is that the Federal Reserve will hike its main interest rate at least once by the end of the year'. Strategists at BlackRock, in a note Reuters quoted, read the pricing differently: 'With markets pricing more Fed tightening than we think will materialize, there is limited scope for a sustained dollar bull run.' ^{[19, 18, 16]}

On dates. Lennar's report covers the quarter to 31 August and says that during it the 30-year fixed mortgage rate rose 'to approximately 7%' and the ten-year Treasury yield 'to approximately 5%'. The weekly readings Freddie Mac published in those three months ran between 6.43 and 6.69 percent, and the Treasury's ten-year ended each day between 4.38 and 4.75. The survey's first reading above 7 percent this year came on 24 September and the ten-year's first close at 5.00 or above on 15 September, both after the quarter ended and before the report was filed on 2 October. ^{[13, 10, 1]}

What settles it next

The dated records, each from its own source. The Treasury's three sales, with bids closing at 1 p.m. on Tuesday 6, Wednesday 7 and Thursday 8 October. The minutes of the September meeting at 2 p.m. on Wednesday 7 October. Freddie Mac's survey at noon on Thursday 8 October. The consumer price index for September, which the Bureau of Labor Statistics releases at 8:30 a.m. on Wednesday 14 October. The Fed's decision at 2 p.m. on Wednesday 28 October. The services survey for October at 10 a.m. on Wednesday 4 November. Chapter seven opens on the first of these to move the table. ^{[8, 7, 10, 9, 5]}

Sources

Every stock is a company; the desk grades the company behind the stock. This article describes; it does not recommend. Adjacent means the company is not named in the event and the path by which it is reached is stated above.

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