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Seller’s remorse? On the 16^th, the Federal Open Market Committee voted unanimously to raise the Federal Funds target range by a quarter-point to 3.75% to 4.00%, the first increase since July of 2023. The statement framed the move as support for a timelier return to the 2% inflation goal. The dot plot skewed hawkish, with sixteen of eighteen policymakers penciling in at least one more hike this year and the projected 2027 cut removed. The longer-run neutral rate moved to 3.25%, its highest in a decade. Fed Chair Kevin Warsh described the move three times as having “removed a dose of accommodation,” signaling further tightening ahead as a first step in potentially unwinding last year’s 75 bps of rate cuts. He ran another tight press conference, limiting reporters to one question apiece while crediting a strengthening economy, inflation trends that were not passing the test, and a shifting geopolitical backdrop. The data underneath reinforced the framing. August Retail Sales rose 1.2% against a 0.8% survey, August import and export prices ran hotter than expected, and Initial Jobless claims fell below 200K to 196K, with Continuing claims dropping to their lowest since January 2024. Brent crude oil, which had pushed toward $108 midweek on Middle East supply risk, settled near $104 by week end, keeping a supply-driven bid under the inflation outlook.

Bear flattener: The policy-sensitive 2-year Treasury yield jumped above 4.70% into the decision, its highest level since 2024, driven by a higher expected monetary policy path ahead. The 10-year posted its second consecutive close above 5.00%, the first such occurrence since 2007, and closed the week at its highest level since July 2007. With the front end rising faster than the long end, the move bear-flattened the 2-to-10-year Treasury curve to roughly 22 bps, its narrowest level since March 2025. Meanwhile, 1-month TERM SOFR has soared nearly twenty basis points since the end of August and is at its highest level since November of last year. The 20-year bond reopening on Tuesday was met with solid demand, a reassuring sign that investors were willing to step in for duration even with the Fed decision a day away and long-end yields at elevated levels. Looking forward, the CME FedWatch Tool put the October 28^th meeting near a coin flip at roughly 55% for another quarter-point move, with almost a 43% chance of a third hike at the December meeting.

Freddie Mac carries the calendar: Freddie Mac was the busier of the two Agencies last week, carrying the bulk of the sector’s new issuance through the policy event. It priced the $350.9 million FRESB 2026-SB128 small-balance transaction on Tuesday and followed with the larger $815.7 million K-567 K-deal, a five-year fixed and floating-rate transaction, also out during the week. Freddie also brought Multifamily Participation Certificates (Multi PCs) to market last week, spanning 7- to 15-year and longer fixed-rate, callable, and tax-exempt structures alongside floating-rate paper in the 7- to 10-year part of the curve. Fannie Mae supply stayed light by contrast, with DUS/MBS new issuance at roughly $500 million last week, below typical weekly volumes as elevated rates dampened rate lock activity across the sector. New issue Fannie Mae DUS/MBS investor spreads across the standard 5/4.5, 7/6.5, and 10/9.5 structures were flat on the week. Generic Ginnie Mae Project Loan (PL) and Construction Loan (CL) spreads each drifted a few basis points wider on the week, in part due to the flattening yield curve that has caused bank appetite to wane for Ginnie Mae product. On corporate credit spreads, the Markit CDX Investment Grade 5-Year Index and the Bloomberg Single A Industrial 10-Year Index were roughly flat to marginally wider, near 51 and 70 bps, respectively. Weekly corporate supply of $53.7 billion was just shy of the $55 billion dealer consensus, demonstrating that issuers are still bringing paper despite relatively elevated rates.

The week ahead: With the FOMC behind us, attention this week turns to whether the post-decision repricing in Treasury yields holds as monetary policymakers emerge from their recent communications blackout period. Their read on how much further the dot plot’s implied path has to run will matter for the front end of the yield curve as the market weighs the odds of additional hikes at the remaining two FOMC Rate Decision meetings this year. The data calendar is lighter on top-tier macroeconomic prints. The preliminary S&P Global services and manufacturing Purchasing Managers’ Index (PMI) surveys land Wednesday, providing some of the earliest readings on September economic activity. Weekly jobless claims arrive Thursday, and August Durable Goods Orders and the September University of Michigan sentiment final close out the week Friday. Weekly job claims carry added weight after last week’s sub-200K reading reinforced the full-employment framing, and any firmer sentiment on inflation-expectations figures would feed the same inflation narrative that drove the hike. Energy remains a live variable, with the pace of the Saudi pipeline restoration and any Strait of Hormuz headlines capable of reversing last week’s crude move and the inflation reprieve that could come with it. The September 30^th annual PCE revision sits just beyond the window as a further wildcard.

For fixed-income markets, the near-term focus is the Treasury auction slate. The market will face $69 billion of 2-year notes on the 22^nd, $70 billion of 5-year notes on the 23^rd, and $44 billion of 7-year notes on the 24^th, all testing demand at the higher yield levels. Soft auction stats could pressure the front end, while firm demand could help stabilize benchmark rates. The risks are two-sided and largely tied to the monetary policy path from here. A hawkish read-through from any Fed speaker leaning harder into an October move could push the front end higher and flatten the curve further, while softer data would reinforce the view that last week’s move stands as a one-time adjustment.

Economic Calendar: (Week of 09.21.2026 – 09.25.2026):

09/22: Tuesday

• Treasury Auction: $69 Billion 2-Year Notes

09/23: Wednesday

• Sep P: S&P Global US Manufacturing PMI (Est. 53.6, Prev. 53.9)
• Sep P: S&P Global US Services PMI (Est. 55.9, Prev. 56.5)
• Treasury Auction: $70 Billion 5-Year Notes

09/24: Thursday

• Sep 19: Initial Jobless Claims (Est. 200K, Prev. 196K)
• Sep 19: Initial Claims 4-Wk Moving Avg (Prev. 203K)
• Sep 12: Continuing Claims (Est. 1,745K, Prev. 1,730K)
• Treasury Auction: $44 Billion 7-Year Notes

09/25: Friday

• • Aug Preliminary: Durable Goods Orders (Est. -0.3%, Prev. 1.1%)
  • Sep Final: U. of Mich. Sentiment (Est. 47.5, Prev. 47.8)
  • Sep Final: U. of Mich. 1 Yr Inflation (Prev. 4.6%)