The level is not unusual. From 1962 to 2007, the 10-year averaged 7.0%. From 1998 to 2007, it averaged 4.9%. Today's yield sits close to that pre-crisis norm.

The low-rate era was the exception. From 2009 to 2021, the 10-year averaged 2.3%. That period had long stretches of near-zero policy rates, large-scale bond buying, and low inflation.

Inflation compensation is normal. Real yields are not. A bond's yield has two parts: compensation for expected inflation, and the real return investors earn on top of it. The inflation part is 2.35% today, almost exactly where it was in 2003–2007. The real return part is 2.64%, up from 2.06% in 2003–2007 and 1.75% a year ago. Over the past year, nearly all of the 10-year rise came from higher real yields, while breakeven inflation was essentially unchanged.

Long yields rose even as short rates fell. From September 2024 to September 2026, the effective fed funds rate fell about 1.4 points, even after the Fed's 0.25-point increase on September 16. Over the same period, the 10-year rose about 1.3 points. The long end reflects more than today's policy rate. It likely includes expectations for future short rates and a higher term premium, the extra pay investors want to lock up money for ten years.

The term premium has risen modestly. Estimates differ by model. The NY Fed's ACM model read 0.89% at the end of September, up 0.28 points from a year earlier; on September averages it rose only about 0.1 point. The Fed's Kim-Wright model averaged about 0.94% in September, up roughly 0.5 points. Part of the rise in real yields therefore likely reflects higher expected policy rates, not term premium alone.

The cost is different this time. Federal debt held by the public is about 100% of GDP, against roughly 35% in 2007. CBO projects net interest above $1 trillion in fiscal 2026, about 3.3% of GDP.

Stocks and bonds have moved together recently. The 1-year correlation is +0.33, against an average of −0.37 in 2016–2019.

Deficits are near 6% of GDP at low unemployment.

Foreign investors hold 29.7% of federal debt held by the public, down from about 45% in the 2010s.

Under its September directive, the Fed reinvests into bills, which offers limited support for long bonds.

Breakeven inflation is stable near 2.35%, and the Fed has had a formal 2% target since 2012.

The foreign share is close to its 1992–2007 average of 31%.

The Fed's total Treasury holdings rose about $355 billion, comparing September averages.

Long Treasuries often provide a refuge in growth-driven sell-offs.

With rate expectations held steady, a term premium at its 2004–2007 level leaves the 10-year near 5.0%. At its 1992–2007 level, the 10-year would sit near 5.7%. These are simplified sensitivity cases, not forecasts.

In short, a 5% 10-year is historically familiar in nominal terms. Over the past year, nearly all of the increase came from higher market-implied real yields, while breakeven inflation was essentially unchanged. With federal debt near 100% of GDP, the same rate now carries a much higher fiscal cost than before 2008. Whether yields climb further depends on how many 1990s conditions return. The early signs, larger deficits and weaker stock-bond diversification, suggest the balance of risk is tilted upward.

Sources: Federal Reserve H.15 and H.4.1, Federal Reserve Board (Kim-Wright), NY Fed ACM, BLS CPI-U, CBO. Yields are September 2026 monthly averages; the ACM term premium is the end-of-September reading; foreign share as of January 2026. Simplified sensitivities hold the expected rate path constant.

The memory shortage no longer has an end date

Micron said more than 75% of its next-year shipments are already committed and that it has no line of sight to when supply and demand balance. It expects 2028 to be tighter than 2027. Most of its added construction spending is for clean rooms that open in late 2028 or later. The company can no longer say when the shortage will end.

AI agents are boosting demand for ordinary servers

Until now, most AI spending went to specialized AI chips. Micron said AI agents, software that carries out tasks on its own, run mostly on ordinary servers instead. That is pushing server shipments up in the high teens, and every server needs memory. Micron said memory is now the main bottleneck in data centers. Jabil expects its data-center revenue to grow about 52% next year.

AI is adding work for consultants, not yet removing it

Accenture grew 7% last quarter, booked $22.2 billion of new work, and started advanced AI projects with more than 400 clients this year. Its headcount rose 5% while revenue per employee also increased. But next year’s organic growth guide is only about 1–4%, so AI work has not yet lifted its overall growth.

Shoppers are choosing trips over things

Carnival is half booked for next year at record prices, and its chief executive called vacations “sacrosanct.” Nike guided full-year revenue down high single digits and said the consumer is cautious. McCormick said shoppers are using what is already in their pantry and repurposing leftovers as gas prices stay high. Spending is holding up for experiences while everyday goods soften.

Food cost inflation is still rising

McCormick raised its cost inflation outlook to 6–7% from mid-single digits, citing input, freight and other costs. A week earlier, General Mills said its costs would rise about 6% by its fourth quarter. Carnival offset higher fuel prices with $150 million in efficiency gains. Fuel and freight costs are now showing up in food companies’ outlooks.