The Overnight RateThe respected and trusted borrower still pays. On Monday the Treasury closed paying 5.31% to borrow for ten years, more than at any close since July 2001.
- The 10-year Treasury closed Monday at 5.31%, from 5.28% Friday. Treasury’s daily file has no close that high since July 11, 2001 (Treasury). The 2-year ended at 4.84% and the 30-year at 5.66%. That is two trading days after payrolls printed 29,000 (BLS) and with an October hike down to 21% on Kalshi (Kalshi). Mortgage News Daily’s average 30-year quote finished at 7.61%, the highest since November 2023 (Mortgage News Daily). I’d argue the long end stopped trading the Fed somewhere in September and started trading the supply of Treasuries.
- Stocks took the other side. The S&P 500 closed at 7,773.95, up 0.66%, about 0.3% under its Aug. 13 closing high of 7,798.99. The Nasdaq rose 1.05% to 27,477.31, its highest close of the past year. (Yahoo Finance). December’s hike is 75% on both Kalshi and Polymarket (Polymarket). Equities are trading one fewer hike. Bonds are trading something else.
- Junk-rated companies paid 8.13% to borrow Friday, down from 8.22% Thursday, and their spread over Treasuries narrowed to 3.10 points from 3.24, the first tightening since the widening began on Sept. 23 (FRED, FRED). Investment-grade yields were 6.03% with the spread at 0.85 (FRED). A payroll miss bought the weakest borrowers their best day in two weeks.
Threshold: 8:30
Census and BEA publish the August trade balance at 8:30 ET (BEA schedule). July’s goods and services deficit was $88.6 billion, up from $71.2 billion in June, (BEA). Trading Economics has the August consensus near $102 billion (Trading Economics). News either way is a deficit over $110 billion or under $90 billion. The gap is what the country buys abroad over what it sells.
Wednesday: the Fed releases the minutes of its Sept. 15-16 meeting (Fed), and the G.19 consumer credit report covers August. July’s consumer credit grew at a 4.2% annual rate, with revolving balances at 2.5% (Fed G.19). Freddie Mac prints Thursday at noon from 7.28%.
Who pays: the spread on the mortgage
A lender prices a 30-year mortgage off the 10-year Treasury and adds a spread for the borrower’s right to prepay, the cost of servicing the loan, and the risk the bond investor takes. On Monday that spread was about 2.3 points: a 7.61% average quote against a 5.31% Treasury (Mortgage News Daily, Treasury).
The mechanism, once: the Treasury yield sets the floor and the spread sets the rest, and neither is a number the Fed votes on. On a $300,000 loan, the 2.3-point spread alone is roughly $450 a month of the payment.
Payer: the household signing at Monday’s quote, 2.3 points over what the government pays for the same decade. Payee: the investor holding the mortgage bond and the servicer collecting the loan. I doubt the spread narrows while the 10-year is setting 25-year highs.
Net net: a buyer signing this week pays about 5.3 points to the Treasury’s borrowing cost and 2.3 points to the people between them and the bond. Only the first number has anything to do with the Fed.
Headlines
- Strait of Hormuz ship traffic back to normal by Dec. 31 is 19% on Polymarket; the contract resolves on IMF PortWatch counting 60 or more transits a day on a seven-day average (Polymarket). The Iran-Oman shipping deal by Oct. 31 is 19%, up six points overnight. Diesel is $6.32, down 12 cents in a week and up 42 cents in a month (AAA).
- Average hourly earnings rose 3.0% over the past year to $37.81 (BLS), while headline PCE inflation ran 3.4% in August (BEA). The paycheck is growing slower than the bills it pays. Wednesday’s G.19 says how much of the gap went on a card.
- Polymarket’s 2026 hike count as of Tuesday morning: one 23%, two 67%, three 9% (Polymarket). It counts September, so that is about 77% for at least one more hike this year and roughly 10% for two more.
Trade at 8:30. Minutes Wednesday at 2.