Week ending October 2, 2026

The short version

• Two things happened this week that normally pull interest rates down, and long-term rates rose anyway. The ten-year touched 5.34% midweek, its highest in twenty-four years, and finished at 5.28% against 5.18%. The thirty-year ended at 5.63% from 5.50%.
• Traders went from expecting a Federal Reserve rate increase this month to mostly ruling it out, with the odds falling from about 70% on Monday to 22% by Friday.
• September payrolls came in at 29,000 against a forecast of 90,000, and revisions took another 60,000 out of July and August. July is now a month in which the country lost jobs.
• Unemployment rose to 4.2%. Pay is growing 3.0% a year while prices grow 3.4%, so the average paycheck is losing ground.
• The G7 agreed to release 100 million barrels of oil and diesel, with the diesel frontloaded into the next twenty days. Diesel has come off its record to $6.34 a gallon, still 72% above a year ago.
• Investors in a $5 billion Blue Owl technology credit fund asked to withdraw 39% of its shares. The fund let 5% out.

1. Rate risk: the Fed came off the table and long rates climbed anyway

Two pieces of news landed this week that would normally push borrowing costs down. The Federal Reserve's preferred inflation measure came in below forecast on Wednesday, and Friday's jobs report was the weakest in months. Traders drew the obvious conclusion: having started the week putting the odds of a rate increase at the October 28 meeting near 70%, they ended it with those odds at 22%.

Long-term rates went up regardless, and the path there matters as much as the destination. Midweek the ten-year touched 5.34% in intraday trading, its highest in twenty-four years and past the peak it reached in 2007. It fell on Friday morning when the jobs numbers landed, which is what should happen, then turned around over the afternoon to close the week at 5.28% against 5.18% the Friday before. The thirty-year finished at 5.63% from 5.50%. Long-term Treasury bonds lost 2.3% over the week, their second straight weekly decline, while the two-year, the maturity that follows Fed policy most closely, ended roughly where it started.

Stocks took it calmly: the S&P 500 slipped 0.3% on the week and the Dow 1.3%, while the Nasdaq added 0.5%.

That pattern is the cleanest test yet of something we wrote about last week. The Federal Reserve sets short-term rates, and this week the market decided it would leave them alone. Long-term rates are set by whoever is willing to buy government bonds, and what those buyers charge depends on how much borrowing is coming and what they expect inflation to do over ten and thirty years. A soft month of hiring changes neither.

The portfolio read. Many portfolios still carry long-term bonds on the theory that weak economic news makes them go up. This week delivered weak economic news, cooler inflation and a Fed stepping back, about as close to the ideal scenario as that theory gets, and long bonds fell anyway. When the long end is driven by the government's financing needs rather than the business cycle, duration stops being a hedge and becomes a separate bet. Better to know that before the next downturn.

2. Growth risk: hiring stalled and pay is losing to prices

The September employment report was weak in three different ways at once. Employers added 29,000 jobs against a forecast of about 90,000. Revisions removed another 60,000 from the two prior months, turning July from a gain of 21,000 into a loss of 10,000 and cutting August from 162,000 to 133,000. Unemployment rose to 4.2% from 4.1%.

July has now been published three times: a loss of 23,000 in August, a gain of 21,000 in September, and a loss of 10,000 on Friday. We reported that August figure as 162,000 in our September 4 issue, which is what the government published at the time; the revised number is 133,000. Over the past twelve months, hiring has averaged about 45,000 a month.

Start with the benign reading, because it is real. Unemployment at 4.2% is low by any historical standard, and this is a slowdown in hiring rather than a wave of firing. Companies have stopped adding people without starting to cut them.

The harder number is pay. Average hourly earnings rose 3.0% over the past year, the slowest since May 2021, while overall prices rose 3.4%. A worker whose pay went up got a pay cut in what it buys. Strip out food and energy and inflation was also 3.0%, matching wage growth exactly, which puts the entire squeeze in the fuel tank and the grocery cart. Spending held up anyway, rising 0.9% in August in line with forecast, but households funded it from savings rather than income: the saving rate fell to 4.1%, near its lowest since 2022, while income rose 0.2% against an expected 0.5%. That is why surveys read so badly while the spending data looks fine.

Relief may be coming at the pump. The G7 agreed on Friday to release 100 million barrels of oil and fuel, weighted toward diesel and frontloaded into the next twenty days, the second such intervention this year after 426 million barrels in March. Diesel has already eased from its September record to $6.34 a gallon and gasoline to $4.37, though both remain far above last year, by 72% and 39%.

The portfolio read. Weak growth alongside inflation running above wages is the combination that historically troubles both halves of a conventional stock and bond portfolio at once. It is also what makes the question of what a portfolio owns besides stocks and bonds worth asking properly.

3. Credit risk: the line at the exit door got longer

Blue Owl disclosed on Friday that investors in its $5 billion technology income fund had asked to withdraw 39% of the fund's shares in the third quarter. The fund repurchased 5%, its stated quarterly limit and unchanged from prior quarters, paying out about $135 million against the $1.1 billion requested. What changed was the length of the line, and it is a long one by the standards of the industry: requests at the largest non-traded business development companies ran between 10% and 17% over the same quarter.

Its much larger $35 billion credit income fund saw requests of 16.8%, down from 18.8% the quarter before, and repurchased $900 million. Blue Owl attributes the elevated requests to investors resubmitting tenders that went unfilled earlier rather than to fresh selling, and the figure at the larger fund did improve. Both points are fair, and neither changes what an investor in the smaller fund experienced, which is that asking to leave and actually leaving turned out to be different things.

The reason people are asking matters as much as the number. Carlyle published a paper last week estimating that AI computing infrastructure may need about $1 trillion from private credit, more than half of everything the industry manages, and arguing that lenders are repeating the concentration mistake they made in software between 2020 and 2022. Its sharpest observation is that seven or eight counterparties sit behind most of these financings, so a portfolio spread across many separate deals can still be lending to the same handful of companies. Separately, Carlyle's head of global research, Jason Thomas, told Bloomberg in mid-September that these projects are underwritten against the credit of the technology company behind them rather than the economics of the data center itself, which he compared to mortgage underwriting before 2008. Carlyle is itself a lender in CoreWeave's $7.5 billion private loan, alongside Blackstone, BlackRock and DigitalBridge. On September 30 the Bank of England named concentration in AI-related debt one of its top financial stability risks.

The portfolio read. A semi-liquid fund offers a withdrawal schedule that works as long as investors do not all want out at once, which is exactly when they tend to. The question worth asking about any such holding is whether the household's plan still works if a gate closes, and sizing is what answers it, long before a queue forms.

What we’re watching

• Whether the G7 release reaches the pump. One analyst expects diesel to fall 25 to 50 cents within weeks. A reserve release is a one-time supply of fuel, not a repaired refinery.
• The thirty-year Treasury. It rose more than the ten-year, which is where a market says it is worried about supply rather than growth.
• The October 28 Fed meeting. The market has moved the next increase out rather than canceling it.
• Redemption requests at semi-liquid credit funds. The larger Blue Owl fund improved this quarter. One quarter is not a trend.

Prepared by Dynamic Wealth Group. This material is for educational and informational purposes only. It is not investment advice and not a recommendation to buy or sell any security, strategy, or product. Views attributed to third parties are those of the firms named and not of Dynamic Wealth Group. Market data and index levels are as of the dates shown and are subject to change. Index returns are historical, do not reflect fees or expenses, and do not indicate future results; indexes are unmanaged and cannot be invested in directly. Alternative investments carry significant risks, including illiquidity, limited transparency, long holding periods, use of leverage, and possible loss of principal, and are not suitable for all investors. Diversification does not guarantee a profit or protect against loss.

Data sources: Bureau of Labor Statistics Employment Situation, October 2, 2026; Bureau of Economic Analysis personal income and outlays, September 30, 2026; CME FedWatch; Federal Reserve H.15 and market closing quotations; Morningstar daily closing prices; AAA national average fuel prices, October 4, 2026; Blue Owl Capital; Carlyle; Bank of England Financial Policy Committee; Bloomberg; Reuters.