Rates Rise weekly Column

 9/17/2026

  

Rates Rise

 

Thursday 9/17/2026 This column has been anticipating higher interest rates for several years. That is now happening. The benchmark ten-year Treasury note has climbed to a 5% yield. Let’s re-examine how this happened.

Interest rates bottomed in 1942. Rates would rise in a 39-year cycle. Then the ten-year note carried a 2% yield. Rates rose for 39 years peaking at 15.64% in 1981.  Paul Fed Chair Volcker got credit for beating inflation by raising rates to an unsustainable level and that was it. Rates then fell into March 2020 with a yield of .5%. Since then, the 39-year up cycle of rates has resumed. The ten-year rate, as mentioned, has climbed 10x fold since 2020 to 5%.  Powell, the last FED Chair followed the market of low rates for too long.  Now all that has changed. The new FED Chair and Governors unanimously voted to raise the overnight FED lending rate by a quarter point to the 3.75-4.0 % range.

My contention is that the FED simply follows market rates.  Interest rate futures are officially traded at the Chicago Board of Trade. CBT has now merged with the Chicago Mercantile Exchange ot form the CME.  The CME trades all maturities from 3-month bills to 30-year bonds. This year that market has raised the two-year note rate from 3.4 to 4.6%. Is anyone surprised the FED finally got on board with their first increase since 2023?

Yes, Trump was surprised but plainly he does not understand capital markets.

After a sustained move in one direction, markets pause and re-group. That is how happening with bonds and crude oil.  Interest rates have pulled back a slight bit.  We should expect rates to fixate around this new high level for some time before moving higher still.

Thirty-year mortgage rates have now reached 7%. Housing sales have slowed.

West Texas Intermediate Crude WTIC has risen from $75 in nearly August to just over $100 this month.  Prices are now hugging the psychological level of $100. Iran is weakened but shows few signs of giving into US demands to open Hormuz.  The CEO of Chevron, Mike Wirtz, suggests that supply chain interruptions will keep crude prices high for some time. That is surely a better prediction than the White House claim of oil prices falling after the mid-term elections.

The DOW has fallen from 54,500 in early August to 51,687 today. That matches the August rise of interest rates, there is a conection.  No one seems to notice. That is a 3,000 point fall in round numbers. Its uptrend line has fallen. Expect lower stock prices as a result of higher interest rates making safe T bills and CDs more attractive.

FED Chair Marsh quarter point increase is not going to, as Gerald Ford put it, Whip Inflation Now. That was a famous button from his administration. Expect higher inflation and interest rates and lower stock prices.