Treasury Yields Remain Elevated Amid Weak Jobs Data and Strong Dollar
In the week ending October 2, 2026, U.S. Treasury yields remained elevated, with the 10-year and 30-year yields holding above 5%. The 30-year yield hovered around 5.6%, while the 10-year yield rose to 5.3%, and 2-year yields settled at 4.8%. Despite a temporary dip following weak nonfarm payroll data, yields quickly reversed course on Friday, reflecting persistent inflation concerns and stronger-than-expected labor market resilience.
The U.S. Dollar Index surged 0.7% this week, supported by widening rate differentials and geopolitical risks that kept energy prices elevated. Federal Reserve officials, including Vice Chair Philip Jefferson and New York Fed President John Williams, signaled no rush to raise interest rates, causing markets to scale back bets on immediate rate hikes.
The spread between the 10-year and 2-year Treasury yields slightly recovered to 0.44%, up from 0.29% the previous week. The iShares 20+ Year Treasury ETF (TLT) ended the week 2.3% lower, while the iShares 1-3 Year ETF (SHY) dropped about 0.2%, marking its sixth straight weekly decline. Retail sentiment on TLT was bullish, while SHY saw bearish sentiment.
Bond yields across international markets also rose, with German Bunds, UK Gilts, and French bonds reaching elevated levels. Despite the bond rout, inflows into bond ETFs captured 42% of all ETF inflows in September, indicating investor interest in higher-yielding assets.