Buyers pull the 10-year Treasury yield back to 5.233% from a 24-year high of 5.34%

From the 5.34% high to the 5.233% close is a retreat of about 10.7 basis points ^[12]. It took one session of buying, after a quarter in which the 10-year rose more than in any quarter since 1994 ^[2]. The Daily Upside lists several developments behind that buying ^[3], and they support different conclusions.

Two of them concern the Federal Reserve. The September ISM report showed manufacturing growing more slowly than expected ^[4]. According to the publication, that cooling could give the Fed cause to hold off on more rate hikes ^[14], and Fed Vice Chairs Philip Jefferson and Michelle Bowman suggested policymakers had more room to wait ^[5]. A buyer acting on those signals is betting on the rate path. A hot US data print would undo that bet whatever happens in Paris.

The third is the safe-haven case. Prime Minister Sebastien Lecornu's budget failed to settle worries about French deficits, and the spread between French and German 10-year yields reached its widest since the euro area's debt crisis of the early 2010s ^[6]. Investors, the publication reports, showed a preference for US and German bonds as relatively risk-free ^[7]. Germany's place in that sentence matters. The demand went to both core markets, so the evidence shows a preference for those two over France and does not single out Treasuries.

A fourth motive runs through the rest of the report, and it is price. The Wall Street Journal reported that money managers are telling clients to return to Treasuries and the 60-40 portfolio, arguing that the high yields and cheap prices on long bonds are too good to pass up ^[8]. Brian Spinelli, co-chief investment officer at Halbert Hargrave, told the paper that "the biggest challenge is going to be psychological" ^[9], referring to investors who still associate bonds with the near-zero rates of the Covid era. JPMorgan recorded the largest inflows ever into the iShares 20+ Year Treasury bond ETF ^[10]. Those buyers are paying for a yield level, and they would want it with or without a French budget.

The three readings predict different things. If the haven case is right, more French stress should pull the 10-year lower. If the Fed case is right, the next strong US release reverses Thursday. If price drives it, buyers reappear whenever the yield nears this level, regardless of either. I think price accounts for most of Thursday's bid, and the haven demand is real but shared with Germany. The case against me is that a spread at a crisis-era wide is exactly when haven buying should appear, and it did appear. What would prove me wrong is the 10-year falling on a day when US data runs hot and the French spread widens. That combination removes the Fed explanation and leaves haven demand standing alone.

Borrowers are still paying for the quarter. Freddie Mac put the average 30-year fixed mortgage at 7.28% this week, after the biggest rise in four years ^[11]. That is about 205 basis points above Thursday's 10-year close ^[13], though the gap is rough because it sets a weekly survey against a single day's yield.