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Daily Commentary

Commentary prepared by Alloya Investment Services, a division of the wholly owned CUSO of Alloya Corporate Federal Credit Union. Alloya Investment Services is a leading broker/dealer consultant to credit unions.

Tuesday, October 6, 2026 at 8:00 am CT
Commentary prepared by Tom Slefinger, Market Strategist

Market Indications

10/05/26 Line chart titled “Historic Treasury Curves – Year Ago, 30 Days Ago, Current.” The chart compares Treasury yields across maturities from 3 months to 30 years. Three lines are shown: a gray dotted line for one year ago, a green dashed line for 30 days ago, and a blue solid line for current yields. All three curves rise as maturities lengthen. Current yields are highest across nearly all maturities, increasing from about 4.2% at 3 months to about 5.7% at 20 to 30 years. Yields from 30 days ago range from approximately 3.9% to 5.1%, while yields from one year ago range from about 3.6% to 4.6%. The current yield curve is steeper and remains above the historical curves at all maturities beyond 3 months.

Other Market Indicators

Market Indicators
2s/5s Tsy Spread0.23-0.02
2s/10s Tsy Spread0.47-0.02
2s/30s Tsy Spread 0.84-0.02
DJIA-30 51,276.90+0.18%
S&P-500 7,773.95 +0.66%
NASDAQ27,477.31+1.05%
Dollar Idx 101.78-0.36%
WTI87.30-2.37%
Gold4,173.35+0.81%

Daily Commentary

Recap – Treasury yields are back at 2002 levels, but Mega Cap Tech does not care. Investors are still willing to pay up for massive future revenue streams, even at a much higher discount rate. This latest yield spike is not about inflation. Rates rose yesterday while oil fell, Market-based inflation expectations went nowhere. It may not be the Fed either. Several FOMC members have backed away from the hawkish talk, and markets are largely pricing out an October hike.

10/06/26 Line chart of 10-year and 30-year U.S. Treasury yields from 2001 through October 2026. After declining from peaks above 6% in the early 2000s and reaching lows near 1% during the 2020 pandemic, both yields rose sharply. By October 2026, the 30-year Treasury yield reached 5.63% and the 10-year Treasury yield reached 5.28%, their highest levels in more than two decades. The chart highlights that long-term Treasury yields have returned to levels last seen in 2001 and that the yield curve has steepened as long-term rates increased.

The real problem is supply. Hyperscalers are spending and borrowing like drunken sailors. Spending by Alphabet, Amazon, Meta, Microsoft and Oracle is expected to jump from $412 billion in 2025 to $789 billion in 2026. That's a 92% increase in just one year. By 2029, estimated capex from these five hyperscalers is nearly $1.2 trillion a year. At some point, investors will demand to see a return on all that spending.

10/06/26 Stacked bar chart showing annual capital spending by Alphabet, Amazon, Meta, Microsoft, and Oracle from 2019 through projected 2029. Combined spending increases from approximately $30 billion in 2019 to $210 billion in 2024 and $410 billion in 2025. The chart projects spending to rise 92% in one year, reaching $790 billion in 2026, then continuing to grow to $1.03 trillion in 2027, $1.12 trillion in 2028, and $1.16 trillion in 2029. The graphic highlights rapidly increasing investment in AI infrastructure across major technology companies and notes that annual spending is expected to approach $1.2 trillion by 2029.

Meanwhile, Washington keeps flooding the market with debt. Treasury Secretary Bessent is also losing credibility, which is not helping. The market is resetting R-star (long term neutral rate) higher because public and private demand for capital is overwhelming supply. Translation: The price of money is moving into a higher range until something breaks.

For now, Treasuries are being bid a smidge higher with the benchmark 10-year Treasury yield at 5.67%. The long bond is 5.63%.  Stocks are firmly higher as WTI falls another 1% to $89.40 per barrel and bonds catch a modest bid. The DXY is finally lower, slipping below 102. Gold is 1% higher at $4,173 per ounce, and Bitcoin is little changed at $85,478.

Stay tuned and have a great day!

Economic Calendar

October 5 - 9, 2026

10/05/26 Table showing key U.S. economic events scheduled for October 5 through October 9, 2026. On October 5, forecasts include the S&P Global U.S. Services PMI at 58.7, the Composite PMI at 58.3, and the ISM Services Index at 55. On October 6, the August trade deficit is expected to widen to negative $102 billion from negative $88.6 billion. October 7 includes MBA Mortgage Applications. On October 8, initial jobless claims are expected at 200,000 and continuing claims at 1.7 million. Wholesale inventories are forecast to rise 0.7% in August. On October 9, the University of Michigan Consumer Sentiment Index is expected at 47.7, down from 48.1. The table highlights upcoming economic indicators, labor market data, trade figures, housing activity, inventory growth, and consumer confidence.

Future Fed Expectations

Source: Bloomberg

10/05/26 Table showing market-implied Federal Funds rates for upcoming Federal Reserve meetings from November 2026 through January 2028, as of October 5, 2026. The implied rate rises from 3.93% at the November 2026 meeting to 4.74% by November 2027, then levels off near 4.72% through January 2028. Compared with one week earlier, expectations for the next two meetings increased slightly by 0.04 and 0.03 percentage points. Expectations for most later meetings declined, with the largest downward revision of 0.12 percentage points at the December 2027 meeting. Overall, the table indicates markets expect gradual Federal Reserve rate increases through late 2027 followed by stabilization.

 

10/05/26 Line chart titled “Expected Fed Funds Path.” The chart shows market expectations for the Federal Funds rate at upcoming Federal Reserve meetings from November 2026 through May 2027. The projected rate rises steadily over time, increasing from approximately 3.93% in November 2026 to 4.08% in December 2026, 4.15% in January 2027, 4.32% in March 2027, and 4.53% by May 2027. The upward-sloping line indicates expectations for gradual Federal Reserve rate increases over the period shown.

 

 

Select Probabilities based on the Futures
Probability of Fed Funds rate HIKE on October 28, 202622%
Probability of Fed Funds rate HIKE on December 9, 202681%

**All quoted rates are indications and are subject to change without notice.
* ISI is a member of the FINRA/SIPC.

The information contained herein is prepared by ISI Registered Representatives for general circulation and is distributed for general information only. This information does not consider the specific investment objectives, financial situations or particular needs of any specific individual or organization that may receive this report. Neither the information nor any opinion expressed constitutes an offer, or an invitation to make an offer, to buy or sell any securities. All opinions, prices, and yields contained herein are subject to change without notice. Investors should understand that statements regarding future prospects might not be realized. Please contact Alloya Investment Services to discuss your specific situation and objectives.