A Note to Clients: What the Bond Market Is Signaling This Week
Sep 30, 2026
Why I'm writing
I am not a financial planner, and this is not investment advice. I am your tax and accounting professional, but when I notice something in the financial system that could seriously affect the people I work with, I want to warn you and provide information to assist you.
Something is happening in the bond market right now that I think is worth a phone call to whoever manages your investments.
I am not predicting a crash. Serious people disagree about where this goes. But the next two weeks, especially this coming week, bring some specific, publicly reported events that will tell us more, and I would rather you hear about them ahead of time than after.
What's happening, in plain terms
The U.S. government borrows money by selling bonds, and the interest rate it has to pay is now the highest in about 20 years. As of this week the 10-year Treasury pays about 5.25% and the 30-year about 5.6%. Those rates matter because nearly every other rate in the economy is built on top of them: mortgages (now above 7.5%), business loans, and the math investors use to decide what a stock is worth.
Why are rates this high? Three things at once. Inflation is running above 3%, driven largely by oil and fuel prices tied to the conflict in the Middle East. The Federal Reserve raised rates in September for the first time since 2023 and may do so again on October 28. And some of the biggest traditional buyers of U.S. bonds, especially Japan, have been selling rather than buying.
Here is why that could reach your retirement account, and your other securities investments:
When a safe government bond pays 5.5%, investors have less reason to hold expensive stocks. The stock market is also unusually concentrated: seven large technology companies make up roughly a third of the S&P 500, and those companies are spending enormous borrowed sums on AI data centers. One of them, Oracle, signaled last week that it may delay payments on its largest project. Fitch Ratings, a major credit rating agency, now publishes a downside scenario in which U.S. stocks fall 35% and the economy enters recession in 2027. That is not their forecast. It is their "what if" case, and the fact that it is on the official list is new.
Major Wall Street banks still expect stocks to hold up. Their view is that rates this high will attract big, patient investors back into bonds, which stabilizes everything. The pessimists say those buyers are not showing up. Which side is right is exactly what the next few bond sales will start to show.
Three dates to watch: October 6, 7, and 8
Next week the Treasury holds three bond sales, called auctions, one each day. Results are posted shortly after 1 p.m. Eastern and reported within minutes by financial news outlets. You do not need to read the numbers. The headlines will tell you what you need to know.
Date | What is sold | What it tells us |
Tuesday, October 6 | 3-year notes, about $58 billion | Early read. Short-term paper is easiest to sell, so weakness here is a warning. |
Wednesday, October 7 | 10-year notes, about $39 billion | The benchmark. This is the rate mortgages and stock valuations key off. |
Thursday, October 8 | 30-year bonds, about $22 billion | The one that matters most. This is where foreign buyers have been leaving and where the strain is concentrated. |
The first two days set the stage for the third. If Tuesday and Wednesday go badly, the pressure on Thursday's 30-year sale rises, and a bad result there would be the clearest evidence yet that the pessimists have a point. If Tuesday and Wednesday go well, Thursday matters less and the "banks are right" story gains ground.
What a bad result sounds like in the news: "weak demand," "poor auction," "large tail," "foreign buyers step back," "dealers forced to absorb," "yields jump to new highs." Three days in a row of that language, ending with a bad 30-year sale, is the pattern that would make a significant stock market pullback more likely, and it is the signal to act on the next section.
What a steady result sounds like: "solid," "in line," "absorbed without trouble," "yields little changed." That means the market is holding for now, not that the risk is gone.
What a good result sounds like: "strong demand," "stopped through," "foreign buyers return," "yields fall after auction." A strong 30-year sale on Thursday would be real evidence that patient investors are stepping in at these rates, and that the danger is easing.
One more date: October 15, when the government reports how much U.S. debt foreign countries bought or sold in August, the month Japan spent a record sum defending its currency. That report will confirm or contradict what the auctions suggest.
What I suggest you do
Call your financial planner or investment advisor this week, before the auctions, not after. The point is not to sell anything. It is to make sure someone who knows your full picture has already thought about what they would do if the news turns.
Questions worth asking them:
How do I balance my portfolio or otherwise safeguard against a potential significant stock market decline, or even a more-than-modest correction?
If the stock market fell 20% to 35% over the next year, how would my portfolio hold up, and would my retirement date or income change?
How much of what I own is concentrated in the large technology companies, directly or through index funds? Should I change that?
Do I have enough in cash or short-term holdings to cover my needs for a year or two without selling stocks in a downturn?
If the October 8 auction is reported as weak and rates keep rising, is there anything you would want to do, and can we agree on that now?
Are there tax consequences to any of those moves? That is where I can help, and I am glad to coordinate with your advisor.
If you do not have a planner, and you have retirement or securities investments, this is a reasonable time to find one. I can suggest questions to ask such as the above, but I cannot recommend investments or tell you what to buy or sell.
One last thing. It is entirely possible the auctions go fine, yields settle, and this note turns out to be an abundance of caution. I would much rather that than the alternative, and the conversation with your advisor is worth having either way. And stay in touch with her or him as future events unfold and continue to seek advice from seasoned planners, then go with your gut as to what is best for you and yours.
Disclaimer
This note is for general information only and reflects publicly reported market conditions as of September 30, 2026. It is not investment, legal, or financial planning advice, and it does not take into account your individual circumstances. Records In Order and its principals are not registered investment advisors. Market data cited here comes from published sources including the U.S. Treasury, the Federal Reserve, CNBC, and Fitch Ratings, and may change. Please consult a licensed financial advisor before making any investment decision.
Scott C Turner, CPA
Comments