US Treasury yields keep climbing: 2-year up for 6th week, 30-year hits 5.5%, highest since 2004

As the final week of September ushers in the transition from the third to the fourth quarter, global investors remain fixated on the trajectory of U.S. Federal Reserve policy, with the ongoing "Treasury storm" set to dominate trading sentiment.

U.S. Treasury Yields Continue to Surge

By Friday's close, a vicious cycle of Middle East tensions pushing oil prices higher, which in turn fuels U.S. inflation, drove key Treasury yields higher:

• 2-year Treasury yield: Closed at 4.86%, marking a sixth consecutive weekly gain.
• 10-year Treasury yield: Reached 5.16%, the highest level since 2007.
• 30-year Treasury yield: Hit 5.5% on Friday, the first time since 2004.

(Source: TradingView)

Key U.S. Economic Data on the Horizon

Two major data releases next week could significantly influence the Fed's rate-hike narrative and the volatile Treasury market.

Wednesday: August PCE Inflation Data

The U.S. will release the August Personal Consumption Expenditures (PCE) price index. According to consensus expectations compiled by TD Economics:

• Headline PCE: Expected to hold steady at 3.7% year-over-year.
• Core PCE: Expected to remain at 3.3% year-over-year.

Both readings remain well above the Fed's 2% long-term inflation target. The same day will also see the release of ADP employment data, personal income, and consumer spending figures.

(U.S. core inflation has remained in the 3.3%-3.4% range since March. Source: tradingeconomics)

Technical Note: The Bureau of Economic Analysis (BEA) will adjust the price/deflator methodology for three PCE components starting with next week's report. Goldman Sachs and JPMorgan estimate the new methodology could revise some previous core PCE readings downward by approximately 0.1 to 0.2 percentage points.

(BEA previewed this adjustment in June)

Friday: September Nonfarm Payrolls

The U.S. Labor Department will release the September jobs report. A Reuters poll of economists expects:

• New jobs added: 100,000, down from 162,000 in August.
• Unemployment rate: Expected at 4.2%.

With inflation remaining elevated, stronger-than-expected employment data could become a burden for markets, as it may reinforce the case for further rate hikes.

Market Pricing of Fed Rate Hikes

According to the CME FedWatch Tool as of Friday's close:

• Probability of a rate hike at the end of October: 64.2%
• Probability of an additional rate hike by December: 51%

U.S. Stock Market Shows Internal Divergence

Despite the pressure from rising Treasury yields, U.S. equity indices appear resilient on the surface, but internal dynamics reveal a clear split:

• The S&P 500 is less than 1% below its mid-August record high and is up approximately 13% year-to-date.
• However, 8 of the 11 major S&P 500 sectors declined in September.
• The S&P 500 Equal Weight Index fell about 4% over the same period.

A Catalyst-Heavy Week for Tech Stocks

SpaceX Starship Flight 14

SpaceX is preparing for the 14th test flight of its Starship. The key highlight: the Starship spacecraft will attempt to enter Earth orbit for the first time. It will also attempt to deploy 26 next-generation Starlink V3 satellites. Each V3 satellite is designed to significantly enhance satellite internet capacity.

OpenAI DevDay 2026

On Tuesday, OpenAI will hold its 2026 Developer Day (DevDay) in San Francisco. CEO Sam Altman is scheduled to deliver a keynote address at 10:00 a.m. local time (Wednesday, 1:00 a.m. Beijing time). The event will cover API updates, developer tools, technical demonstrations, and workshops.

AI Policy Meeting

Also on Tuesday, reports indicate that President Donald Trump, House Speaker Mike Johnson, and CEOs from several technology companies (specific participants yet to be confirmed) are expected to hold a meeting on artificial intelligence policy.

Micron Earnings

Micron Technology will report its fiscal Q4 2026 earnings after the bell on Wednesday. The results are critical not only for the company itself but also as a barometer for the DRAM, HBM, and broader AI data center markets.

Tesla Roadster Update

Tesla's official website has launched a countdown page for the Roadster. Combined with recent speculation around SpaceX's cold gas thruster systems, interest has grown in the possibility of a "flying" Tesla vehicle.

Auto Industry and Q4 Transition

As the calendar turns from Q3 to Q4, Tesla and other automakers will be in focus.

NASA Crew-13 Mission

On October 1, SpaceX plans to launch the NASA Crew-13 mission via a Falcon 9 rocket, sending four astronauts to the International Space Station.

Google's TPU Satellite

On the same day, Google will launch a prototype satellite carrying its custom-designed TPU chips into orbit via a rideshare mission. This will be the first test of TPU performance in space, exploring the feasibility of future orbital AI computing infrastructure.

Middle East Conflict Remains a Key Risk

Investors cannot ignore the ongoing Middle East conflict, now in its fifth month.

Latest Developments

Over the weekend, President Donald Trump publicly rejected Iran's proposal to reopen the Strait of Hormuz within seven days.

According to CCTV News, Iranian Foreign Minister Abbas Araghchi responded, stating that Iran has received the initial U.S. reaction to the proposal but has not yet received any specific details from mediators. Iran is awaiting the final position from mediators and will make a decision accordingly.

Araghchi added that Iran will not make concessions to the U.S. on its established conditions. The reopening of the Strait of Hormuz depends on whether Iran's conditions are met. Any progress on the issue hinges on the fulfillment of these conditions, and Iran will not compromise on these matters.

This means oil prices will remain a key variable next week, linking geopolitical tensions, inflation expectations, Treasury yields, and broader financial market direction.

Key Events for the Week Ahead (Beijing Time)

Monday, September 28

• Bank of Japan releases minutes of July monetary policy meeting

Tuesday, September 29

• Reserve Bank of Australia interest rate decision
• Eurozone September industrial sentiment index
• U.S. August JOLTS job openings

Wednesday, September 30

• China September PMI
• U.S. September ADP employment
• U.S. August Core PCE price index
• U.S. Q2 real GDP annualized quarter-on-quarter (final)

National Holiday Begins

• A-share markets closed: October 1–7; reopen October 8
• Hong Kong market closed: October 1 only; resumes normal trading October 2
• Southbound Stock Connect and Shanghai/Shenzhen Stock Connect schedules adjusted accordingly

Thursday, October 1

• Eurozone September manufacturing PMI (final)
• ECB President Christine Lagarde speaks
• Bank of Japan releases summary of opinions from September monetary policy meeting

Friday, October 2

• Japan September Tokyo CPI
• Eurozone September CPI
• U.S. September nonfarm payrolls report

(Source: Cailianshe)