Long-term yields ease from a 2002 high after a top Fed official plays down an October hike

Methodology note: Morning report, generated before the September 30 US open. Sources cited inline.

Long-Term Yields Ease From Their 2002 High as the Fed's Williams Cools October Hike Talk, With PCE and Micron Still Ahead

Bonds recovered part of Tuesday's selling overnight, and the reason is the Fed rather than the data. New York Fed President John Williams said late Tuesday he sees "no need for urgency" after September's hike and expects one more increase "late this year", which most readers take to mean December. October hike odds fell from about 70% on Monday to about 50%. The thirty-year is down 4 basis points to 5.553% and the ten-year 3 basis points to 5.221%, just under the 5.22% level it broke on Monday. Stock futures are flat. That leaves August PCE at 8:30 a.m. to show whether prices justify the hikes the Fed has already signalled. A ten-year close back above 5.29% would say the relief is over.

• Williams said "we have time to gather more information" and sees one more hike "late this year". October hike odds dropped from about 70% on Monday to about 50% — the market now splits October and December roughly evenly.
• The ten-year is down 3 basis points to 5.221%, the two-year 1 basis point to 4.876% and the thirty-year 4 basis points to 5.553%. The long end is falling more than the short end, which partly reverses Tuesday, when the gap between the two-year and the thirty-year widened.
• Economists expect core PCE to rise 0.3% in August, up from 0.2% in July, with the annual rate at 3.3% to 3.4% and headline steady at 3.7% — a core reading above 0.3% would put October back in play despite Williams.
• Brent is up $1.14, or 1.1%, to $103.73 after President Trump denied he would ease sanctions on Iran. Brent is heading for a monthly gain of about 14%, so the oil input to inflation has not eased despite Tuesday's 2.6% drop.
• Micron reports after the close, and options are pricing a move of about 7%, below its four-quarter average of 8%. Traders are bracing for a smaller surprise than usual, even though the chip sector enters the print down about 14% this quarter.

September 30, 2026 Pre-Market

What changed since last report

Last night's read held on its main point: the thirty-year closed near 5.57%, above the 5.44% level named as the one that would undo it. One figure needs correcting. That report put October hike odds at about 64%. Reports after Williams spoke put them nearer 50%, so the front end moved further than the report said.

• Williams moved the rate path. He is vice chair of the Fed's rate committee and one of its three leaders, so "late this year" carries more weight than a regional president's view. Odds fell by about 20 points in a day with no new data.
• Oil lost its relief. Brent is rising even after the Energy Department's offer of up to 40 million more barrels from the emergency reserve, the last of March's 172-million-barrel release, with bids due October 6. The US is running out of reserve oil to offer, and the offer has not held prices down.
• Europe is paying the same bond-market cost. The STOXX 600 is set for a 1.5% monthly decline, its first in six months, as war-driven inflation risk hits bonds. The pressure on long yields is not only a US supply story.

Movers

Boeing is up about 3% before the open to near $193 after the Pentagon picked it to build the Navy's F/A-XX carrier fighter under a contract worth more than $20 billion. A hold above $190 after the open would show the market treating the contract as more than one day's news.

Summit Therapeutics is up about 18% after a $2 billion investment from AstraZeneca, which funds the company from a large drugmaker rather than through a share sale.

Concentrix is down about 11% to near $22.11 after fiscal third-quarter revenue and guidance fell short of expectations.

Navitas Semiconductor is up about 8% after winning a government contract to develop next-generation chips.

What to watch

PCE at 8:30 a.m. The Fed raised rates to 3.75%-4.00% in September, and its median official expects one more quarter-point hike this year, so the question is when, not whether. A 0.3% core reading matches what economists expect and leaves Williams's December timing intact. A 0.4% reading would test whether 50% odds for October can hold, and would put the ten-year back toward Tuesday's 5.29% high. A 0.2% reading would add to the case for December, but Tuesday showed that softer US data does not always pull the thirty-year down.

Micron after the close. Analysts expect revenue near $51.2 billion, up about 353%, adjusted earnings near $31.59 a share and a gross margin of about 86%, with first-quarter guidance near $56.6 billion. Options price a 7% move, and Tuesday's flow leaned toward calls, about 61,000 bought against 37,000 puts, so positioning is tilted toward a beat. A guide above $56.6 billion with the margin held would say the chip sector's 14% quarterly drop is about higher interest rates rather than demand. A margin below 86% would give the drop a fundamental reason.

The thirty-year between 5.44% and 5.644%. The 2002 high of 5.644% is 9 basis points above this morning's level. Quarter-end rebalancing today and Friday's payrolls, where economists expect 100,000 jobs with unemployment at 4.1%, are the next tests. A close above 5.644% would take long yields to levels last seen in 2001. A close under 5.44% would say the rise in long-term borrowing costs is fading, not just pausing.