Crude oil topped $100 a barrel in mid-September as the prolonged conflict between Iran and U.S.-allied forces disrupted shipping through the Strait of Hormuz. The disruption pushed diesel prices to record highs, adding to inflation pressures. Meanwhile, hiring improved after a softer summer. August payroll growth exceeded consensus forecasts, while upward revisions to June and July erased much of the previously reported weakness, easing fears that job creation had stalled. Given this backdrop, the Chandler team expects the Federal Reserve to continue to focus monetary policy on price stability, with at least one more 25 basis-point rate hike likely before year end.

The Federal Open Market Committee unanimously raised the federal funds rate target range by 25 basis points to 3.75%–4.00% at its September meeting, marking its first rate increase since 2023. Chair Kevin Warsh said the move would support a more timely return to the 2% inflation target. He declined to signal the path of future rate moves, saying policymakers would not prejudge upcoming decisions. However, the median projection of Committee members places the federal funds rate at 4.1% at year end, which implies one more 25 basis point increase.

Treasury yields rose sharply across the curve in September. Short-term yields climbed as investors priced in a higher path for the federal funds rate. Longer-term yields rose on fiscal concerns, global spillovers, and inflation expectations, as long maturities absorbed the repricing of inflation risk while bill yields remained anchored near the policy rate. Heavy bond supply pushed intermediate maturities up the most. The 2-year rose +55 basis points to 4.89%, the 10-year rose +54 basis points to 5.29%, while the 5-year gained +59 basis points to 5.09%. The spread between the 2-year and 10-year Treasury yields was at +40 basis points at September month-end. One year ago, the 2s/10s spread stood at +54 basis points. The 3-month bill yield rose to 4.11%, above the top of the new federal funds target range, a sign that investors expect further rate increases. Corporate credit spreads, the extra yield investors demand over Treasuries, also widened to 84 basis points from 80.

U.S. Treasuries sold off sharply in September, pushing yields higher across the curve and longer-term rates to multi-decade highs. The 10-year yield climbed from about 4.79% at the start of the month to 5.29% on September 30. The 30-year yield reached 5.63%, its highest level since 2002, while the 2-year yield closed the month at 4.89%, up from 4.40%. Persistent inflation, tighter Federal Reserve policy and energy disruptions tied to geopolitical conflict fueled the selloff, alongside supply-demand pressures in the bond market. The Fed raised its benchmark rate by 25 basis points, while the spread between short-term Treasuries and the federal funds rate suggested investors were pricing in further increases. A wave of corporate bond issuance added to the supply of debt competing for investor demand, putting additional upward pressure on yields.

Read more: CAM Bond October 2026