1The bond sell-off is a repricing of Fed hikes, and the swap market does not support the deficit explanation
FRED shows the 10-year Treasury yield at 5.18% on 24 September, up from 4.96% two sessions earlier and its highest since 2007. The gap between the 10-year and 2-year yields widened to 0.36 points on 25 September, from 0.26 two days before. Joseph Wang, a former Fed trader, said on his Fed Guy channel that 10- and 30-year yields rose "basically every single day" last week. He put 30-year inflation-protected yields near 3.2%, also a multi-decade high.
Wang's explanation is the Fed's expected path. Futures on overnight rates added another 25bp hike week over week, plus a longer hold at the top. He said roughly 100bp of hikes have been priced in since Governor Waller was urging patience a few weeks ago. His cause is a global energy shock that has central banks hiking together. He cited German yields rising too, although Germany borrows little.
He rejected three other stories. The US deficit cannot explain a global move. Growth is not hot, at 1.5% last quarter and 2% the quarter before. And heavy AI-related bond issuance is not crowding out Treasuries, because swap spreads have not turned sharply negative the way they did around Liberation Day.
Felix Prehn, on Felix & Friends, tells the opposite story. He blames debt: $40 trillion outstanding and about $8 trillion to refinance within 12 months at around 5%. He added that Japanese investors sold almost $30 billion of Treasuries in the first quarter as yields at home rose. The two accounts predict different things. Wang's says yields fall when inflation or the war eases. Prehn's says they stay high regardless. Swap spreads are the tell. A sustained move deeply negative would favour Prehn.
Prediction markets are steady rather than panicked. Kalshi prices a 25bp October hike at 64 cents, unchanged on the day, on 544,000 contracts of open interest. Polymarket shows 64.5% on $2.7m of liquidity. Polymarket gives two hikes in 2026 a 52% chance and three a 39.8% chance. It prices the 10-year reaching 5.5% before 2027 at 25%, a thin market with about $7,000 traded in 24 hours.
So what: if Wang is right, the long end is hostage to oil and inflation data, not Treasury auctions. Next week's inflation print is the first test.
2Stocks, credit and gold have barely moved while long yields sit at 19-year highs
Wang said he has "never seen anything like" the calm elsewhere. Corporate bond spreads stayed narrow. Emerging markets ignored a stronger dollar. Gold held up despite higher real yields. Friday's close fits his description. The S&P 500 rose 0.51% to 7,743 and the Nasdaq rose 0.48%, according to Yahoo Finance. The Dow rose 0.93%. Reuters reported the dollar at a two-month high on hike expectations.
Wang's reason is positioning. He argued that many traders are conditioned to expect a policy climb-down and to buy every dip. He said a real breakthrough in the Strait of Hormuz could lift the Nasdaq 10% quickly because so many want to chase it. He also said more crude is now getting out of the strait, which blunts the oil shock. Refined products like diesel remain the problem.
The odds of that breakthrough are low. Reuters reported President Trump rejected an Iranian proposal to reopen Hormuz and end the fighting, and Iran said on Saturday it still wants a diplomatic solution. Polymarket prices normal Hormuz traffic by 31 December at 20.5%, down a point, on $136,000 of 24-hour volume. By 31 October it prices 6%.
Wang flagged a second risk the market has not priced. Polling has turned sharply against the administration ahead of the midterms. He sees growing odds of a Democratic House and Senate, which he said could bring tax rises and pressure on the AI trade.
So what: equity resilience is a bet on a deal. With a deal priced at about one in five by year-end, the gap between the calm in stocks and the moves in bonds is unresolved.
3Diesel is carrying the energy shock into shelf prices, beyond the reach of rate hikes
Eric Pachman, of the nonprofit Data for the People, argued on Excess Returns that the inflation risk runs through diesel, not headline oil. By his count, diesel feeds into 44.4% of the items in the consumer price index through freight. He built a pass-through model from shippers' filings. If diesel rose from about $6.68 a gallon to $7.84 and stayed there a year, he estimates 0.46 to 0.65 points would be added to CPI. He expects groceries to rise 1.5% to 2%. Rail fuel surcharges lag by about two months, so part of that is still on its way.
His test is the October retail earnings calls. He named , and , and said tariff refunds were spent holding prices down in the summer. The question is how long they absorb fuel surcharges before passing them on. He expects the rest to follow once the largest retailer moves. Wang made the same point from the other side: diesel is at all-time highs, which is why the market expects the Fed to push rates toward 5% and hold them there.
Pachman added a labour-supply angle. He said the number of foreign-born men in the US fell by almost 2 million from a peak near 25 million in March 2025. Participation among native-born men has not risen to fill the gap. He reads that as upward pressure on service wages. He also cautioned against reading too much into the monthly jobs number. Payrolls rose 162,000 in August, per FRED, but the survey's confidence interval is plus or minus 122,000. Unemployment was 4.1%.
Bloomberg reported that the administration's threat of a diesel export ban is already making US exports more profitable, as Europe is short after losing Iranian supply and Ukrainian strikes on Russian refineries.
So what: a rate hike does not make diesel cheaper. If retailers start passing through fuel costs in October, inflation stays high even if crude eases.
4The EV mandate is gone and some China tariffs are being cut, while the Iran war stays open
President Trump posted on Saturday that he had approved new fuel-economy standards ending the previous administration's electric-vehicle mandate. He named , and as manufacturers who "called me wanting to build here", and said over $100 billion is being invested in US autos. The rule change lowers compliance costs for petrol-vehicle makers. It also removes a source of demand for EV charging.
Reuters reported that China and the US agreed during President Xi's visit to cut tariffs on $30 billion of goods and to open a dialogue on AI. Wang called the summit light on detail but good for the global economy. He noted that China backs the US position against tolls in the strait while still supporting Iran.
So what: both moves ease costs at the margin. Neither changes the energy shock behind the rate story.
Next week's inflation and jobs data will decide which bond story holds
Personal income and PCE inflation print on 30 September, alongside revised GDP. September payrolls follow on 2 October. A hot PCE would support Wang's Fed-path reading. A fall in yields on a soft print would weaken the debt-supply story. reports on 28 September and after the close on 30 September. Micron is the first large AI-hardware report with the 10-year above 5%. The Conference Board's consumer confidence reading is due on 29 September.
