Finance Evening | 10-Year Treasury Yield Hits 19-Year High as Fed Nears First Hike in 3 Years

📊 North America Markets Today

Source: Yahoo Finance, closing prices

1. US stocks fall as 10-year Treasury yield hits 19-year high

Source: CNBC

US stocks closed lower on Tuesday as investors awaited this week’s Federal Reserve policy decision and Treasury yields climbed to multiyear highs. The Dow Jones Industrial Average fell 328.09 points, or 0.63%, to 52,093.11. The S&P 500 slipped 0.45% to 7,585.73, while the Nasdaq Composite dropped 0.78% to 25,981.57.

The benchmark 10-year Treasury yield rose as high as 5.041% during the session, its highest since 2007, before easing; it ended up more than 3 basis points at 5.00%. Global bond yields have been rising for weeks on fears that the US-Iran war will fuel inflation and that central banks are turning hawkish. Losses in the S&P 500 and Nasdaq were cushioned by a rebound in some AI-linked stocks: Coherent gained nearly 2%, AMD rose 2% and Qualcomm advanced more than 4%.

Higher oil prices added to the tension. Saudi Arabia shut a key pipeline that bypasses the Strait of Hormuz, sending Brent November futures up nearly 3% to $108.75 a barrel, while WTI gained more than 4% to $105.83. All eyes are on the Fed’s decision on Wednesday, with fed funds futures implying a more than 94% chance of a quarter-point hike.

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2. Surging Treasury yields spook investors

Source: Yahoo Finance

Surging US Treasury yields are starting to unsettle stock investors. Bank of America’s latest fund manager survey showed the share of global managers overweight stocks — in other words, bullish — fell to 49% from 56% last month, while cash levels rose to 3.9% from 3.5%, the biggest monthly increase since March. A “disorderly bond sell-off” is now the top market tail risk.

Treasury yields have faced upward pressure throughout September, driven by persistent inflation signals and elevated crude oil prices, reinforcing expectations of higher Fed rates. The 10-year yield rose to 5.02% on Tuesday, the highest level since 2007.

Lee Munson, president and chief investment officer at Portfolio Wealth Advisors, said on Yahoo Finance that as the 10-year yield approaches 5%, investors prefer long-duration sovereigns over betting on a company’s next quarterly earnings. Still, fund managers remain optimistic on corporate earnings, the AI investment cycle and economic growth.

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3. Nvidia CEO says no new AI laws needed, calls for self-regulation

Source: BBC

Nvidia chief executive Jensen Huang said there is no need for new laws on AI, arguing companies should simply not release anything they are not confident will be safe. He spoke at a conference in California alongside several other AI bosses. Anthropic’s boss said it is tempting to attack competitors, but it is more responsible to establish industry-wide standards.

US Senator Bernie Sanders called on the US to work with China on AI regulation, saying a treaty should be established to pause development of “AI superintelligence”. Former Trump adviser Steve Bannon called AI the “defining issue of our time”. Earlier, President Donald Trump downplayed AI concerns, calling claims it will take over the world a hoax.

OpenAI executive Chris Lehane said the company is working on safety efforts alongside other major developers, including rival Anthropic and Google, with talks that began several weeks ago. Amid uncertainty over a potential slowdown in AI development, US stock markets closed negative for a second day in a row on Tuesday, though the declines were minimal.

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4. Canada is a safe harbour for global capital, Carney says

Source: BBC

Prime Minister Mark Carney is pitching Canada as a “safe harbour” for global investors amid geopolitical and economic uncertainty, courting more than 100 major investment firms. He said Canada is “perfectly situated to build in the new global economic order”, pledging C$1 trillion in investment over the next five years to reduce reliance on the US. Investors at the summit represent more than C$120 trillion in assets.

More than 160 projects were on offer, spanning data centres, pipelines and port expansions. Ottawa also floated new tax incentives, including a “mega deduction”, and promised a one-year review target for major projects. Carney also announced plans to allow private investment in four main airports — Toronto, Vancouver, Montreal and Calgary — while the federal government retains ownership of the underlying land and assets.

The prime minister’s office said Tuesday the summit had generated nearly C$500 billion in new investments across critical infrastructure, digital technology, energy and defence. Meanwhile, new US tariffs took effect Tuesday on a number of Canadian goods, with bans on items such as alcohol and motorcycles due next week. Protesters outside the opening gala accused the government of a “great Canadian sell-off” of public resources.

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5. Buying a home now comes with junk fees — nearly $2 billion a year

Source: NPR

US homebuyers are running into a growing pile of hidden fees. In a Cincinnati suburb, Kelly MacDonald spotted a strange $425 charge her agent had added to a contract — and learned it was a junk fee.

According to new research from the think tank Consumer Policy Center, these fees come under many names, such as document storage and administrative fees, and are spreading, now often charged to both buyers and sellers who together pay nearly $2 billion a year — an estimate the group calls conservative. Because the fees are due at closing, they are not spread over a 30-year mortgage and can sometimes exceed $1,000.

Fellow Wendy Gilch advises buyers to watch for admin-type fees in their contracts and to challenge them, since the agent’s commission — often five figures — is not worth risking over a comparatively small fee. MacDonald ultimately bought a five-bedroom home for $445,000 and negotiated for the seller to cover the $425 fee.

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6. Some US companies use tariff refunds to top up wages and 401(k)s

Source: Fortune

In March, the US Supreme Court struck down President Donald Trump’s IEEPA tariffs, paving the way for about $100 billion in import taxes to be redistributed to American importers. US Trade Representative Jamieson Greer had suggested companies give the windfall to workers as bonuses. Since May, the US Treasury has paid out more than $100 billion in refunds.

Some companies have taken that advice. Houseware brand Williams Sonoma said in last month’s earnings report it would allocate $10 million for one-time payments to eligible employees’ 401(k) accounts “in recognition of their efforts navigating the IEEPA tariffs”. TJX, which received $331 million in refunds, said it accrued $112 million in incremental expenses for year-end incentive compensation and discretionary bonuses for eligible associates globally.

The tariffs appear to have had the opposite effect on reshoring: US manufacturing jobs shrank by more than 100,000 during the first year of Trump’s second term. Alex Durante, a senior economist at the Tax Foundation, said companies have many ways to absorb tariffs, and returning part of the refunds to workers is just one of them.

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7. Fed meeting begins, with markets expecting first hike in three years

Source: Yahoo Finance

The Federal Reserve’s September policy meeting kicked off Tuesday morning, and markets overwhelmingly expect a 25-basis-point rate hike on Wednesday. That would be the first increase since 2023, when the Jerome Powell-led central bank ended its post-pandemic hiking campaign. Inflation has now stayed above the Fed’s 2% target for more than five years, with the Middle East war the latest driver of higher prices.

Fed Chairman Kevin Warsh has said “we have work to do”. CME Group’s FedWatch tool shows traders pricing in about a 92% chance of a quarter-point hike, though a hold is not entirely off the table. Markets will also scrutinize the Summary of Economic Projections, the so-called dot plot, for clues on policy in the years ahead.

Goldman Sachs analysts led by Ben Snider noted that historically the S&P 500 has seen an average three-month return of negative 2% at the start of a Fed hiking cycle. Moody’s Analytics chief economist Mark Zandi wrote on X that “the odds of a serious Fed policy mistake are uncomfortably high and rising”.

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8. US borrowing costs hit highest since 2007 as oil jumps

Source: BBC

The US 10-year Treasury yield rose as high as 5.04% on Tuesday, its highest since 2007, before easing back. Government bond yields have been climbing globally for months on worries that inflation stoked by the oil surge since the start of the US-Israel war with Iran will push interest rates higher. The Treasury has been buying back bonds to push yields down, and Treasury Secretary Scott Bessent called the intervention “successful”.

The global benchmark wholesale oil price rose above $109 a barrel on Tuesday, up from around $86 at the end of August, as concerns about Saudi Arabia’s ability to export oil resurfaced. Investors expect Fed Chair Kevin Warsh to raise rates to fight oil-driven inflation, but President Donald Trump opposes a hike, having long argued lower rates are good for the economy.

Competition for debt from AI firms is also driving yields up: tech giants are borrowing heavily to build data centres, lifting their own bond rates and, in turn, government bond yields. Carol Schleif, chief market strategist at BMO Wealth Management, said bond markets had been signalling for weeks that higher rates may be needed, and rates could stay elevated if geopolitical tensions and high energy prices remain “front and center”.

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9. Oil squeeze tightens as Hormuz alternatives come under pressure

Source: Fox News

The US is choking off Iran’s oil exports through the Strait of Hormuz, but the routes meant to shield other Gulf producers are now under pressure too. A drone attack last week badly damaged Saudi Arabia’s East-West Pipeline, a critical bypass carrying crude across the kingdom to the Red Sea; repairs could leave it out of service for three to five weeks after it had been moving roughly 2.6 million to 4 million barrels per day.

Meanwhile, Iran-backed Houthi rebels have seized more territory and strategic islands around the Bab el-Mandeb Strait, which connects the Red Sea to the Gulf of Aden and the Indian Ocean. According to Kpler and others, Iranian crude and condensate loadings fell to roughly 220,000 to 255,000 barrels per day in August, down from about 740,000 in July and roughly 2 million in March. Since the US reinstated its naval blockade on July 14, no Iranian crude cargoes have successfully crossed the strait to China.

The disruption is reaching American consumers: per AAA, the US diesel price hit a record national average of $6.23 a gallon on Monday, while regular gasoline averaged $4.32, and Brent climbed as high as roughly $110 during the day. Miad Maleki, a senior fellow at the Foundation for Defense of Democracies, said sanctions, the naval blockade and diplomatic isolation combined are increasingly hitting Iran’s broader economy.

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10. What a Fed rate hike could mean for mortgage rates

Source: CBS News

The past few years have been unkind to US mortgage rates, and recent months especially so. As of mid-September, the average 30-year fixed mortgage rate sits at about 7.43%, up from about 6.43% in early July. The Fed meets this week, and persistent inflation has put another hike back in focus. Fed Chair Kevin Warsh recently indicated policymakers could have more work to do if they don’t gain confidence that inflation is moving sustainably toward the 2% target.

Importantly, the Fed does not directly set mortgage rates. When officials raise the federal funds rate, they change a short-term benchmark that influences borrowing costs economy-wide; fixed mortgage rates are more closely tied to longer-term bond yields, including the 10-year Treasury. Fed data show the 10-year Treasury yield rose from 4.80% on September 8 to 4.96% on September 11.

Experts suggest borrowers focus on what they can control: shopping multiple lenders, considering a rate lock when the numbers work, and looking at the monthly payment rather than the headline rate. For example, principal and interest on a $300,000 30-year mortgage would be about $1,896 a month at 6.5%, versus roughly $1,996 at 7% — about $100 more. Improving credit, lowering the debt-to-income ratio or making a larger down payment can also help secure a better offer.

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