10-year Treasury yield ends the week at 5.28% as bets on a Fed rise fade

The 10-year Treasury yield closed at 5.28% on Friday, up 4 basis points on the day and 11bp on the week, according to Treasury’s daily yield curve. It was the highest close at the end of any week since March 2002, by the Fed’s series for the 10-year yield. It got there on a day when the jobs report gave the Federal Reserve a reason to stop raising rates.

Employers added 29,000 jobs in September, the Bureau of Labor Statistics said, and the unemployment rate rose to 4.2%. Average hourly earnings rose only 0.1% on the month. Bonds rallied at first, as we reported on Friday. Soon after the release the 10-year yield was down at about 5.17%, investingLive reported. The rally did not last. By the close the 10-year had made up the whole fall and more, and the 2-year yield, the one most sensitive to the Fed, ended 5bp higher at 4.83%.

The two ends of the curve parted

Over the week, short and long yields went different ways. The 3-month bill yield fell 5bp and the 1-year 4bp. The 2-year rose 2bp. From the 5-year out, the rises grew with maturity: 8bp for the 5-year, 11bp for the 10-year and 14bp for the 30-year, which closed at 5.63%.

Change in US Treasury yields, week to 2 October, bp

Change in US Treasury yields, week to 2 October, bp. Source: US Treasury, daily par yield curve rates, 25 September and 2 October 2026.

3-month	−5bp
1-year	−4bp
2-year	+2bp
5-year	+8bp
10-year	+11bp
30-year	+14bp

Source: US Treasury, daily par yield curve rates, 25 September and 2 October 2026.The Macro Notebook

The short end follows what the market expects from the Fed, and those expectations fell. At Friday’s close, CME FedWatch put the chance of a rate rise at the Fed’s meeting on 28 October at 22.1%, and the chance of no change at 77.9%.

The long end went the other way. The gap between the 10-year and 2-year yields widened to 45bp, from 36bp a week earlier and 20bp on 21 September, by FRED’s spread series. When the curve steepens like this while rate expectations fall, the extra yield is not coming from the Fed.

Why the 10-year Treasury yield kept rising

It is not coming from inflation either. The 10-year yield on inflation-protected Treasuries rose 9bp in the week, to 2.92%, Treasury’s real yield curve shows. The 10-year breakeven, the inflation rate priced into the gap between the two notes, ended the week at 2.36%, 2bp higher. Of the 11bp rise in the 10-year yield, 9bp was the real yield.

We wrote on 29 September that the sell-off was about real yields, not inflation. A week later that still holds. On 30 September the real yield closed at 2.93%, the highest since November 2008 by the Fed’s series for inflation-indexed yields.

What has changed is the reason. In September the short end rose with the long end: the 2-year yield went from 4.39% on 1 September to 4.92% on 28 September, as the market priced a tighter Fed. This week the short end fell and the long end still rose. Investors expect less from the Fed in the coming months, but they want more to lend for ten or thirty years. That extra return for holding a long bond is what economists call the term premium, and on this week’s evidence it is rising.

Stocks did not mind

The S&P 500 rose 0.7% on Friday to 7,722.72. The Nasdaq 100 closed at a record, and gold fell 0.8% to $4,142.55 an ounce, according to investingLive. For shares, lower odds of a Fed rise counted for more than higher long-term yields.

That balance may not hold if long yields keep rising. A real yield near 3% raises the rate at which investors discount future profits, and it makes a safe ten-year bond a closer rival to shares.

What to watch

Date	Event	Why it matters
6 Oct	Auction of $58bn of 3-year notes	The first of three tests of demand at these yields
7 Oct	Auction of $39bn of 10-year notes, and the minutes of the September Fed meeting	How strongly officials leaned towards more increases
8 Oct	Auction of $22bn of 30-year bonds	The longest maturity, where yields rose most this week
14 Oct	US consumer prices for September	The first full read on how far energy prices have spread
27–28 Oct	Fed meeting	FedWatch puts the chance of a rise at about one in five