Rates Mixed as Market Braces for More Economic Data

MARKET UPDATE – THURSDAY OCTOBER 1, 2026:

Good morning – rates are trading mixed this morning – short-end swap rates are down a touch as traders sort through shifting Fed expectations, and back-end swap rates are up on the ever-present fear of higher inflation. The yield curve is slightly flatter as a result.

This morning, market participants are likely to pay attention to the S&P Global Manufacturing PMI data at 9:45 AM and the ISM Manufacturing & Prices Paid data released at 10:00 AM, as they are inflation related. Additionally, Fed officials are all over the tape today, so we will see a steady stream of Fed-speak throughout the day.

Swap rates out to 5 years are currently down 1-2 bps; long end swap rates are up 1-4 bps, depending on tenor. It definitely feels like rates are biased to the upside heading into these numbers, so I am not sure how long the dip on the short-end will last this morning. If the inflation components on the numbers miss expectations, we could see short-end rates rise as Fed rate-hike expectations ramp up again.

Odds for a 25 bp Fed rate hike in October dipped to 38.4% yesterday, but the odds for a December rate hike jumped to 81.5%. Traders merely bumped the next 25 bp hike out one meeting…for now. Currently, market pricing implies four, 25 bp rate hikes before the end of 2027.

SOFR OIS SWAP RATES 9:15 AM

SOURCE: BLOOMBERG LLP

ECONOMIC DATA SCHEDULE & EXPECTATIONS FOR 10/1 & 10/2

SOURCE: BLOOMBERG LLP

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