The month ends with long-dated Treasury yields at multi-decade highs and mortgage rates above 7%.
As September closes, the numbers describe a market that has repriced the cost of money for a longer stretch than many investors expected.
The 30-year Treasury yield climbed as high as 5.62% this week, a level last seen in 2002. The 10-year note held around 5.24% on Wednesday, near its highest since 2007. The dollar index sits near 101.33 and is on course for a monthly gain of about 1.9%. Gold, the traditional hedge against exactly this kind of uncertainty, is down roughly 5.4% for the month at about $4,202 an ounce, even after a modest bounce on Wednesday.
A steep long end
At its peak this week, the 30-year stood about 38 basis points above the 10-year. That steepness says investors are demanding extra compensation to lend for three decades rather than one, a premium tied more to fiscal and inflation risk than to where the Fed sets short-term rates next month. It also explains why the Fed debate over October timing has done little to pull long yields lower.
The consumer feels it first
Housing is where the move becomes personal. The average 30-year fixed mortgage rate stood at 7.03% in the latest weekly survey, with the 15-year at 6.42%. The spread between the 30-year mortgage and the 10-year Treasury is roughly 1.8 percentage points, which means any further climb in benchmark yields passes through to borrowers almost directly. The next mortgage survey is due Thursday.
Credit is paying attention
Corporate borrowers are starting to feel it too, if only at the margin. The option-adjusted spread on U.S. high-yield bonds widened to 2.93% as of from 2.66% a week earlier, a 27-basis-point move. That still leaves junk spreads tight by historical standards, but the direction is worth noting in a month when the risk-free rate itself rose.
Reading gold's slide
Gold's decline alongside a rising dollar is the most informative piece of the scorecard. Gold can attract safe-haven demand during financial stress, but higher yields and a stronger dollar can also weigh on it. Instead the metal has given back ground while remaining about 8.7% higher than a year ago. The combination is consistent with pressure from higher yields and a stronger dollar; it does not, by itself, establish how much future tightening is priced in.
What to watch
The August PCE inflation report and the final revision to second-quarter GDP on Wednesday, the mortgage survey on Thursday and September payrolls on Friday. A hot inflation print would test whether 5.62% on the long bond is a peak or a waypoint.