The 10-Year Treasury Just Hit Its Highest Close Since 2002

The Treasury Department's daily par yield curve put the 10-year at 5.31% on Monday, Oct. 5, the highest close since May 14, 2002, when it finished at 5.32%. It eased to 5.27% on Tuesday. The 30-year finished Monday at 5.66%.

Equity indexes moved the other way. The S&P 500 and the Nasdaq Composite both closed at record highs on Tuesday.

Stock buyers are pricing an earnings path strong enough to outrun higher borrowing costs. Bond buyers are pricing more Treasury supply, sticky inflation pressure, and fiscal arithmetic that does not turn on the next Federal Reserve meeting. Mortgage rates, for households on Long Island, track the 10-year more closely than the overnight policy rate. Freddie Mac's Primary Mortgage Market Survey put the average 30-year fixed mortgage at 7.28% as of Oct. 1, up from 7.03% a week earlier.

Input-cost pressure in services is part of the bond market's case. The Institute for Supply Management's Prices Index for services registered 74.0 in September, up from 72.6 in August and the highest reading since July 2022, when it was 74.5. The broader Services PMI was 54.9, still in expansion. Seventeen services industries posted higher prices paid in September, ISM said; none posted a decrease.

A 10-year yield that has not been this high in a generation means long-term borrowing stays costly even if stocks keep celebrating. Voters arguing about affordability are looking at the wrong ticker if they watch only the equity indexes. The bond market is the one setting the price of a mortgage, a car loan, and the federal government's own next auction.