EconomyThe Big Picture

Households' one-year inflation expectations rose to 3.9%, and the 10-year yield fell

In the week ending October 9, households raised their inflation expectations for the next year, the bond market charged a little less for inflation over 10 years, and the 3-month Treasury yield finished above the Federal Reserve's range.

Oct 10, 2026 · 4 min read · By ETF.net Research

A person uses a calculator next to a small stack of cash on a wooden desk.

Key takeaways

New York Fed households now put one-year inflation at 3.9%.
Most of the ten-year yield's fall came out of breakevens.
The three-month yield finished above the Fed's target range.
Waller anticipates more hikes, not necessarily at consecutive meetings.

The Federal Reserve Bank of New York reported that the median household expectation for inflation over the next year rose to 3.9%, the highest since May 2023. The 10-year Treasury yield fell 4 basis points, or 0.04 percentage point, to 5.24% in the week ending Friday, October 9.

Of that decline, 3 basis points came out of breakeven inflation, the extra yield on an ordinary 10-year note over one protected against inflation. Breakeven inflation fell from 2.36% to 2.33%. The real yield, the yield on the inflation-protected note, fell 1 basis point, from 2.92% to 2.91%. The five-year breakeven fell 3 basis points as well, to 2.34%.

Yields from two years out to 30 years moved nearly in parallel. The 2-year yield fell 3 basis points, to 4.8%, and the 30-year fell 3 basis points, to 5.6%. The gap between the 2-year and the 10-year narrowed by 1 basis point, to 44 basis points.

The 10-year yield rose to 5.31% on Monday, from 5.28% the prior Friday, and then fell to 5.24% by Friday.

The 10-year yield hit 5.31% Monday, then fell to 5.24% Friday

U.S. Treasury par yield curve, Oct. 2–9, 2026

Oct 2Oct 9

It had closed at 5.28% the prior Friday.

The 3-month yield moved the other way. It rose 6 basis points, to 4.25%. In September the Federal Open Market Committee, the body that sets the Federal Reserve's policy rate, raised the target range by 25 basis points, to 3.75% to 4%, after nine months on hold. The 3-month yield finished 25 basis points above the top of that range. The committee's next two meetings, on October 27-28 and in December, both fall within the next three months.

The 3-month yield rose as 2-year through 30-year yields fell

U.S. Treasury par yield curve, week ending October 9, 2026

3-month6
2-year-3
5-year-4
10-year-4
30-year-3

Change in basis points, week ending October 9.

The iShares 20+ Year Treasury Bond ETF, TLT, rose 0.6%, after falling 1.5% the week before. The iShares TIPS Bond ETF, TIP, which holds inflation-protected Treasuries, rose 0.3%.

What the surveys measured

The New York Fed's Survey of Consumer Expectations, released Wednesday, was fielded from September 1 through September 30. The one-year median rose 0.3 percentage point, to 3.9%. The three-year median rose 0.1 percentage point, to 3.3%. The five-year median held at 3.0%. Disagreement among respondents widened at each horizon.

The University of Michigan's preliminary October survey, out Friday, also showed higher inflation expectations. Year-ahead expectations rose to 4.7% from 4.6%, and longer-run expectations rose to 3.5% from 3.4%.

Business surveys on Monday described an expansion. A reading above 50 means more firms reported an increase than a decrease. S&P Global's September services index was 58.8, up from 56.5 in August.

The firm said the surveys pointed to annualized economic growth of around 4% in the third quarter and 5% in September alone, and said the price gauges pointed to accelerating inflation. The Institute for Supply Management's services index was 54.9, down 0.5 point from August, and its prices index was 74.0.

Still counting hikes

Federal Reserve Governor Christopher Waller, speaking Thursday at the Istanbul Economic Forum, gave his own view.

"If the economic data continue to come in as expected, I anticipate additional hikes to support a timelier return of inflation to our 2 percent goal."

The timing, he said, was flexible. The hikes did not need to come at consecutive meetings, but should be in place in an acceptable period of time.

Of the 18 officials who submitted projections in September, he said, 16 expected at least one more increase during the two remaining meetings this year, and four of those 16 expected two more. He cautioned that the projections for the end of 2027 can reflect hikes early in the year and cuts later. Eight officials expected the rate to be 50 basis points higher at the end of 2027 than it is today.

He said futures prices as of Wednesday showed an 85% chance of at least one increase by the December meeting, and nearly a 20% chance of two. By the March 2027 meeting, he said, markets saw nearly an 80% chance of at least two increases, and a 33% chance of three or more.

Mohit Kumar, a strategist at Jefferies, said on Monday that he expected one further increase from the Federal Reserve, and that markets were pricing more than that.

The minutes of the September 15-16 meeting, released Wednesday, recorded no vote against the September increase. Staff estimated that inflation edged up to 3.8% in August, on the personal consumption expenditures price index, the measure the Fed uses for its 2% goal. Some participants said that after more than five years above that goal, elevated inflation could begin to affect expectations and the way wages and prices are set.

The one-year surveys rose. The New York Fed's five-year median did not rise, and Michigan's longer-run figure rose by a tenth of a percentage point. The yield that rose was the 3-month.