Brent near $99 and improving Gulf supply are easing inflation pressure, but hawkish Fed messaging and a $1.77 billion weekly TLT outflow keep the duration call tactical.
The Lead
Treasuries were largely range-bound Tuesday after Monday’s rally. The 2-year yield slipped 0.7 bp to 4.741%, while the 10-year edged 0.3 bp higher to 4.954% and the 30-year rose 0.7 bp to 5.293%. The larger move remains in the curve: 2s10s sits near +21 bps, almost 12 bps flatter than one week ago, as expectations for tighter Fed policy remain concentrated at the front end.
Oil is providing the offset. Brent was near $98.83 this morning, falling for a sixth consecutive session as Saudi Arabia restarted its East-West Pipeline and markets assessed prospects for improved regional oil flows. Treasury futures were modestly firmer overnight, keeping the 10-year below the 5% threshold.
The Fed remains the constraint on a more aggressive duration call. Boston Fed President Susan Collins and Richmond Fed President Tom Barkin both backed last week’s rate increase on inflation concerns, while the September FOMC projections put the median appropriate year-end federal funds rate at 4.1%, above the current 3.75%–4.00% target range.
Preferred positioning remains an income-oriented allocation—collecting yield from lower-volatility bond segments rather than relying on a sharp decline in Treasury rates to drive total return. Favor core bonds, short/intermediate Treasuries, munis and high-quality floating-rate credit; keep the very long end tactical.
Rates Tape
| Market | Latest | 1D Change | 1W Change |
| 2Y Treasury | 4.741% | -0.7 bp | +7.2 bps |
| 10Y Treasury | 4.954% | +0.3 bp | -4.8 bps |
| 30Y Treasury | 5.293% | +0.7 bp | -7.4 bps |
| 2s10s Curve | +21.3 bps | +0.9 bp | -11.9 bps |
| 5s30s Curve | +46.7 bps | +0.7 bp | -6.8 bps |
Duration ETFs have benefited from the decline in longer yields over the past week. TLT is +1.08%, IEF +0.47%, VGLT +0.98%, EDV +1.55% and ZROZ +1.72%. Tuesday itself was quiet, however, with TLT down 0.06% and IEF essentially unchanged.
The price rally has not translated into broad long-duration buying. TLT lost $1.03 billion Tuesday alone and $1.77 billion over one week, suggesting some investors are using the rebound to reduce exposure rather than extend duration.
Macro Signal Board
| Signal | Latest | 1D | 1W | 1Y Pctl. | Trading Read |
| 10Y Treasury | 4.954% | +0.3 bp | -4.8 bps | 98th | Below 5%; attractive but volatile |
| 30Y Treasury | 5.293% | +0.7 bp | -7.4 bps | 97th | Long end stabilizing |
| 10Y Real Yield | 2.63% | +1 bp | +1 bp | 99th | Historically restrictive |
| 10Y Breakeven | 2.33% | -1 bp | -5 bps | 63rd | Oil premium retracing |
| Fed Funds Implied Rate | 3.90% | Flat | +2 bps | 90th | Further tightening remains credible |
| IG OAS | 77 bps | Flat | -3 bps | 33rd | Limited spread cushion |
| HY OAS | 268 bps | +2 bps | -8 bps | 9th | Very rich credit valuation |
| MOVE | 78.6 | -2.6 | -5.1 | 79th | Rates volatility cooling |
| WTI Crude | $94.59 | -$1.19 | -$11.24 | 81st | Inflation shock reversing |
The macro mix is becoming more favorable for Treasuries without becoming especially attractive for credit. Oil, breakevens and MOVE have all backed away from recent extremes, but the 2.63% real 10-year yield remains near a one-year high. At the same time, HY spreads at only 268 bps are near the bottom of their trailing range. The relative value remains stronger in government yields than in corporate spread compensation.
Calendar Watch
Tuesday’s data sent a mixed but generally firm message on growth. ADP’s new high-frequency employment measure showed private-sector employment increasing by an average 20,000 jobs per week during the four weeks ended September 5, up from 16,750 previously. ADP said hiring accelerated for a third consecutive week.
Manufacturing was weaker. The Richmond Fed composite index fell to -2 from +4, with shipments dropping to -5 and new orders to -6. Employment improved to +7, while manufacturers reported a notable acceleration in prices paid—a detail that matters for the Fed even as overall activity softened.
Today’s focus is the preliminary September S&P Global PMIs:
| Time | Release | Consensus | Prior |
| 9:45 a.m. | S&P Global Composite PMI | 56.3 | 56.5 |
| 9:45 a.m. | S&P Global Manufacturing PMI | 54.0 | 53.9 |
| 9:45 a.m. | S&P Global Services PMI | 56.0 | 56.5 |
August’s flash survey had signaled the fastest U.S. business growth since April 2022, stronger hiring and annualized third-quarter growth approaching 3%. Price pressures had cooled, but remained historically elevated. That makes today’s inflation and employment components at least as important for rates as the headline PMI numbers.
ETF Flow Leaders
| ETF | Segment | 1W Return | 1W Flows | 1M Flows |
| SGOV | Ultrashort Treasury | +0.06% | +$1.22B | +$6.43B |
| MUB | Municipal Bonds | -0.07% | +$1.08B | +$1.44B |
| HYG | High Yield | +0.32% | +$1.01B | -$1.32B |
| IUSB | Broad Market | +0.47% | +$528M | +$1.09B |
| IEF | 7–10Y Treasury | +0.47% | +$454M | +$119M |
| VTEB | Municipal Bonds | -0.06% | +$452M | +$1.74B |
| JAAA | AAA CLO | +0.08% | +$370M | +$1.19B |
| SHY | 1–3Y Treasury | -0.06% | +$333M | +$1.10B |
The flow tape is broadening beyond cash. SGOV remains the largest weekly recipient, but MUB and VTEB continue to show substantial municipal demand. Investors are adding tax-exempt exposure despite weak one-month returns, suggesting higher yields are driving allocation decisions rather than short-term momentum.
Credit demand has also improved sharply. HYG attracted more than $1.0 billion over the past week, while short investment-grade ETFs VCSH and IGSB added roughly $326 million and $253 million, respectively. LQD has also moved back to a modest +$144 million weekly inflow, although its one-month flow remains deeply negative at about -$4.73 billion.
The clearest divergence is long Treasuries. TLT is up 1.08% for the week but has shed $1.77 billion, while IEF attracted $454 million. Investors appear more comfortable adding intermediate Treasury duration than committing aggressively to the very long end at this stage of the Fed cycle.
Trading Implications
- Core bonds: Continue adding selectively to BND, AGG and IUSB. Starting yields remain attractive, while lower energy prices reduce one important source of upside inflation risk.
- Duration: Favor intermediate duration over an aggressive long-end overweight. IEF is attracting assets while TLT is seeing large redemptions despite strong weekly performance. Add very long duration primarily on renewed yield backups toward or above 5%.
- Credit: Improving flows into VCSH, IGSB and LQD show demand returning, but a 77 bp IG OAS still argues for emphasizing short/intermediate high-quality exposure rather than long spread duration.
- High yield: HYG’s $1.01B weekly inflow is notable, but HY OAS at 268 bps and the 9th percentile of the past year offers little valuation cushion. Treat the flow rebound as tactical and remain selective on quality.
- Cash management: SGOV, JPST and TFLO remain attractive while the Fed retains a tightening bias. Cash-equivalent yields provide meaningful income without sacrificing flexibility.
- Munis: Strong MUB/VTEB inflows remain one of the clearest allocation signals in the market. Favor short and intermediate tax-exempt exposure where higher yields can be captured without maximizing duration risk.
- TIPS / inflation hedges: The drop in oil reduces the urgency to increase inflation protection. VTIP drew only about $23 million over the week but remains +$588 million over one month. Maintain selective short-duration exposure.
- CLOs / loans: JAAA remains a favored high-quality income sleeve, with +$370 million in weekly flows and +$1.19 billion over one month. Floating-rate exposure continues to fit a policy environment where additional hikes remain possible.
Bottom Line
The rates environment is improving at the margin: oil is falling, breakevens have retreated and the 10-year remains below 5%. But the fixed income flow tape is not signaling an outright duration rush. Investors are favoring cash, munis, intermediate Treasuries and selective credit, while taking money out of TLT even as long bonds rally. Maintain a high-quality income bias, add duration incrementally and use today’s PMI—including its price components—to judge whether falling energy costs are beginning to change the Fed’s inflation calculus.
Sources
- FactSet Research Systems Inc., ETFFixedIncome.com Fund Universe Return & Flow Database, September 23, 2026.
- FactSet Research Systems Inc., September 23, 2026 rates, credit, volatility, commodity, FX and economic-calendar data.
- ADP Research, September 22, 2026 NER Pulse employment update.
- Federal Reserve Bank of Richmond, September 2026 Manufacturing Survey.
- Federal Reserve Board, September 16, 2026 FOMC statement and Summary of Economic Projections.
- S&P Global Market Intelligence, August 2026 U.S. Flash PMI commentary.
- Reuters, September 23, 2026, global markets, Treasury trading and Gulf oil-supply developments.
Disclaimer: This commentary is for informational and educational purposes only and should not be considered investment advice. ETF return and flow data can change quickly and may reflect short-term trading activity rather than durable allocation trends. Fixed income investments are subject to interest-rate risk, credit risk, liquidity risk, inflation risk, tax considerations, and potential loss of principal.
