MediumIV Macro Policy & Sovereign Debt25 September 2026, Friday

Michigan consumer sentiment at a 4-month low of 48.1, 1-year inflation expectations jump to 4.6%; US 30-year yield rises to 5.50%

According to the University of Michigan's final data released on 25 September, consumer sentiment fell from 51.7 in August to 48.1, and 1-year inflation expectations rose from 4.0% to 4.6%. On the same day the 30-year Treasury yield rose to 5.50%, while the 10-year eased to 5.17%.

Location: NEW YORK

According to a 25 September Daily Caller report, the University of Michigan consumer sentiment index was 48.1 in September, against 51.7 in August and 54.9 in September 2025. The expectations index fell 10.1% to 46.3. Inflation expectations for the next 12 months rose from 4.0% in August to 4.6%, returning to the June peak; in February 2026 the rate was 3.4%. Long-run inflation expectations rose from 3.3% to 3.4%. Survey director Hsu said sentiment had fallen by less than 4 points to its lowest level in 4 months.

According to Trading Economics data, the US 30-year Treasury yield rose 0.016 points to 5.50% on 25 September; the monthly increase was 0.32 points and the annual increase 0.74 points. The 10-year yield eased to 5.17% on the same day, but had risen 23 basis points over the previous 3 sessions to around 5.20%; the same source wrote that the market put the probability of a 25 basis point hike at the Fed's next meeting at around 66–70%, and that the Michigan survey confirmed the sharp rise in inflation expectations. A 24 September Briefs report noted that longer-dated yields had risen to levels not seen since 2004.

Talay assessment

Bottom line

Households' 1-year inflation expectations rising 0.6 points in a month to 4.6%, and longer-run expectations to 3.4%, give concrete form to the Fed's concern about expectations becoming unanchored. Although sentiment falling to 48.1 points to weakening demand, the market is prioritising inflation: the 30-year yield rising to 5.50% shows that inflation and debt premia are being demanded over extended horizons.

Likely effects

Fed policyNegativeWeeks
Longer-run expectations rising from 3.3% to 3.4% support the 66–70% probability assigned to an October hike.
Extended-maturity borrowingNegative1–6 months
The 30-year yield rising 0.32 points in a month to 5.50% is pushing up mortgage and corporate borrowing costs.
Türkiye and emerging marketsNegative1–6 months
A US yield floor of 5.17% on the 10-year and 5.50% on the 30-year raises eurobond costs for economies dependent on external financing, such as Türkiye.

Possibilities, ranked

1
Yields stay high55%
Inflation expectations remain elevated, the Fed hikes in October and the 30-year yield stays in the 5.4–5.6% band.
Watch: August PCE and September employment data
2
Demand weakness comes to the fore30%
Falling sentiment feeds into spending and the 10-year yield retreats below 5%.
Watch: Retail sales and consumer spending
3
New spike at the far end of the curve15%
A new rise in energy prices and weak auction demand push the 30-year yield above 5.75%.
Watch: Indirect bidder share at extended-maturity Treasury auctions

Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.

Market reaction

Indicators affected

US 30-year yield▲ 5.50% (+0.016 pts)
US 10-year yield▼ 5.17% (−0.04 pts)
1-year inflation expectations▲ 4.6% (+0.6 pts)
Michigan consumer sentiment▼ 48.1 (−3.6)

Historical context