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Fed leaves the timing open: Last Wednesday’s release of the Fed’s September FOMC Minutes showed all 19 participants backed the 25 bps hike to a 3.75%–4.00% target range. Most also saw another hike as likely appropriate before year-end. The Minutes noted that “almost all participants assessed that, while inflation risks were tilted to the upside, risks to the labor market had diminished and were now broadly balanced.” Policymakers stopped short of committing to an explicit rate path and kept decisions flexible as the data evolves. Fed Governor Christopher Waller reinforced the message last Thursday. He said he anticipates “additional hikes to support a timelier return of inflation to our 2% goal” if the data comes in as expected. He also said hikes do not need to come at back-to-back meetings. Put simply at this time, the Fed looks set to pause in October and could hike again later this year. The CME FedWatch Tool shows roughly 65% odds of a rate “hold” at the October 28^th FOMC meeting (up from about 51% a month ago). Initial Jobless Claims held at 197K (Est. 200K) which shows few layoffs. A steady job market keeps that path on track. Oil rose last Thursday on reports that the U.S. could strike Iran before the November midterms. Gains faded after President Trump said no strike would come before the election. Brent still ended the week at nearly $105 per barrel. Higher oil prices raise inflation worries, so it tends to push Treasury yields up. Consumer data added to the cautious tone on Friday. The October Preliminary University of Michigan Sentiment Index fell to 46.3 (Est. 47.6) as its Current Conditions sub-index dropped to a record low of 44.7 (Est. 50.1). The survey’s 1-Year Inflation Expectations rose to 4.7% (Est. 4.8%) from 4.6%. Weaker sentiment can point to softer spending. Higher inflation expectations also keep pressure on the Fed to tighten monetary policy.

Treasury yields ease but stay near multi-decade highs: Despite hawkish messaging from the Fed, last week’s Treasury auctions showed strong demand for U.S. debt and eased some of the pressure on Treasury yields. Demand was about average for last Tuesday’s $58 billion 3-year note auction and solid for last Thursday’s $22 billion 30-year bond auction. The standout was last Wednesday’s $39 billion 10-year note auction, which drew strong bids. The 10-year and 30-year Treasury yields both again closed at their highest levels since 2002 early in the week before easing. Over the week the 10-year yield fell about 3 bps to near 5.24% and the 2-year yield fell about 4 bps to 4.79%. That left the 2-to-10-year Treasury curve little changed, near 45 bps. Long-term yields also stay elevated because investors want extra yield to hold long bonds amid deficit and inflation worries. That extra yield, known as term premium, has risen across global bond markets. U.S. debt topping $40 trillion for the first time has kept fiscal worries in focus. Looking ahead, markets still expect the Fed to hold interest rates steady in October but see a 25 bps hike as likely by year-end. The CME FedWatch Tool now shows about 88% odds of a hike by the December 9^th meeting.

Agency CMBS investor appetite stays steady: Sentiment stayed vigilant throughout last week as volatile rates made investors slow to commit to aggressively purchasing new deals. Investors still favor block-sized full-term interest-only structures with low leverage. Smaller deals below $10 million drew less interest because of a smaller buyer base and ongoing liquidity concerns compared with standard-sized deals. On volume new issue Fannie Mae DUS/MBS rate lock volume totaled roughly $680 million last week. Activity started very light then picked up last Wednesday when a 15/14.5 dedicated affordable housing transaction made up roughly a third of the week’s volume. Freddie Mac priced its ~ $720 million 5-year K568 K-deal last Tuesday at the tight end of guidance. Pricing at the tight end of guidance points to improving demand for Agency CMBS debt. It also priced roughly $573 million across 13 deals of 7- to 15-year fixed-rate and open prepayment Participation Certificates (PCs). Against that backdrop Fannie Mae DUS/MBS investor spreads tightened 2 bps on the 5/4.5, 7/6.5 and 10/9.5 structures while the 12- and 15-year structures were little changed. That follows an 8 to 11 bps widening over the prior two to three weeks. Ginnie Mae Project Loan and Construction Loan credit spreads widened by about 2 to 3 bps last week and remain near the widest levels of the year. Credit spreads also tightened across most other fixed income last week as steadier Treasury yields lifted risk appetite. The Bloomberg U.S. Residential MBS Average Option Adjusted Spread index tightened about 1 bp. The Markit CDX Investment Grade 5-Year Index tightened about 2 bps and the Bloomberg Single A Industrials 10-year Index spread tightened roughly 3 bps. Light corporate supply also helped overall spread improvement. Investment grade issuance totaled only about $11 billion (Est. $25–30 billion), one of the larger misses of the year. Borrowers waited for Treasury yields to stabilize and for the big banks to report Q3 earnings first.

The week ahead: The U.S. bond market was closed Monday for Columbus Day/Indigenous Peoples Day. Treasuries rallied on Tuesday and Treasury yields pulled back from the multi-decade highs set last week. Fed Governor Waller spoke this Tuesday at Bloomberg’s New Economy Forum in New Delhi. He said higher long-term Treasury yields are helping cool demand and doing part of the work of tighter policy. September Existing Home Sales unexpectedly rose on Tuesday at the strongest pace since May. That ended three straight monthly declines. The gain mostly reflects contracts signed before mortgage rates climbed back above 7%. Elevated rates could keep homeowners in place and renters leasing longer, which supports multifamily demand. Oil fell about 2% as Saudi Arabia’s output recovered, Gulf production came back online, and OPEC cut its demand forecast.

September CPI and PPI are the primary outstanding data releases before the Fed meets on October 27^th–28^th. CPI lands Wednesday with headline expected at 3.6% YoY. A hotter print could put an October hike back in play. The Fed Beige Book follows Wednesday afternoon. This edition will show whether price pressures are broadening and whether consumers are still spending. With the Fed not committed to a set path, this week’s data will help decide whether the next hike comes in October or later. On Thursday, September Retail Sales and PPI arrive alongside Initial Jobless Claims. Gasoline prices should lift the Retail Sales headline, so the Retail Sales Control Group is the cleaner read on consumer spending. Later Thursday Fed Chair Warsh joins a fireside chat with the Managing Director of the International Monetary Fund, Kristalina Georgieva, at the IMF and World Bank meetings. It is his last scheduled remarks before the Fed blackout begins October 17^th.

Freddie Mac is expected to price its roughly $1.1 billion 10-year K183 K-deal this week. Freddie Mac is also bringing its approximately $310 million small balance loan deal (FRESB 2026-SB129) and is targeting roughly $615 million of Freddie Mac Participation Certificates (PCs). About $487 million of the PCs are fixed-rate with mostly 5-year terms and about $128 million are floating-rate. Another roughly $1.5 billion of PCs are slated for the rest of October. Fannie Mae is expected to price a roughly $516 million 5-year GeMS 2026-G5 deal this week as well.

Major banks began reporting third-quarter earnings this Tuesday. Income from lending hit a record and loan losses stayed in check. That points to healthy borrowers and supports risk appetite. Still, JPMorgan CEO Jamie Dimon struck a cautious tone. He said that while current pressures “may be manageable, we remain prepared for a wide range of outcomes.” Investment grade issuance is expected to pick up to about $30 billion this week with big banks making up roughly two-thirds after their earnings reports. Some other borrowers have pushed deals to November in hopes of lower funding costs.

Economic Calendar: (Week of 10.12.2026 – 10.16.2026):

10/13: Tuesday

• Sep: NFIB Small Business Optimism (Est. 98.2, Prev. 98.7)

10/14: Wednesday

• Sep: CPI MoM (Est. 0.60%, Prev. 0.40%)
• Sep: CPI YoY (Est. 3.60%, Prev. 3.40%)
• Sep: Core CPI MoM (Est. 0.20%, Prev. 0.30%)
• Sep: Core CPI YoY (Est. 2.50%, Prev. 2.40%)
• Fed Releases Beige Book

10/15: Thursday

• Sep: Retail Sales Advance MoM (Est. 0.3%, Prev. 1.1%)
• Sep: Retail Sales Ex Auto MoM (Est. 0.6%, Prev. 1.3%)
• Sep: Retail Sales Control Group (Est. 0.3%, Prev. 1.2%)
• Sep: PPI Final Demand MoM (Est. 0.60%, Prev. 0.40%)
• Sep: PPI Final Demand YoY (Est. 5.40%, Prev. 5.40%)
• Sep: PPI Ex Food and Energy MoM (Est. 0.30%, Prev. 0.20%)
• Sep: PPI Ex Food and Energy YoY (Est. 4.40%, Prev. 4.60%)
• Week of Oct 10^th: Initial Jobless Claims (Est. 200K, Prev. 197K)
• Week of Oct 10^th: Initial Claims 4-Wk Moving Avg (Prev. 198K)
• Week of Oct 3^rd: Continuing Claims (Est. 1,710K, Prev. 1,716K)
• Fed Chair Warsh Fireside Chat with IMF’s Georgieva

10/16: Friday

• Sep: Industrial Production MoM (Est. 0.4%, Prev. 0.0%)