Bond yields surged this week, pushing mortgage rates sharply higher as investors reacted to mounting evidence that the economy remains stronger than expected and inflation pressures may be difficult to contain. The 10-year Treasury yield climbed above 5.2%, its highest level since 2007, while mortgage rates moved back above 7%. Economic reports reinforced the view that the economy remains surprisingly resilient. U.S. business activity expanded in September at its fastest pace in more than five years, weekly unemployment claims fell to just 197,000, and August retail sales rose a stronger-than-expected 1.2% from July and 6.0% from one year ago. The housing market also showed some resilience, with new-home sales increasing 6.4% in August, although the median price of a new home was 5.8% lower than one year ago.

Despite the sharp increase in bond yields and borrowing costs, stocks moved higher this week. Investors appear to be viewing much of the rise in interest rates as a reflection of stronger economic growth rather than simply higher inflation. A stronger economy supports corporate revenues and earnings, while continued investment and enthusiasm surrounding artificial intelligence have provided additional support for technology stocks. The downside is that stronger economic data and persistent inflation concerns reduce expectations for lower interest rates and could keep mortgage rates elevated, creating an ongoing headwind for the housing market. There was no major CPI or PCE inflation report released this week, making next Wednesday’s PCE price index report, the Federal Reserve’s preferred inflation gauge, particularly important for determining the direction of interest rates in the weeks ahead.

Mortgage rates – Every Thursday, Freddie Mac publishes interest rates based on a survey of mortgage lenders throughout the week. The Freddie Mac Primary Mortgage Survey reported that mortgage rates for the most popular loan products as of September 24, 2026, were as follows: The 30-year fixed mortgage rate was 7.03%, up from 6.95% last week. The 15-year fixed was 6.42%, up from 6.26% last week.

U.S. Treasury Bonds – The 10-year treasury bond closed the week yielding 5.17%, up sharply from 5.01% last week. The 30-year treasury bond yield ended the week at 5.49%, up sharply from 5.34% last week. We watch bond yields because mortgage rates follow bond yields.

Stock markets – The Dow Jones Industrial Average closed the week at 51,828.62, up 0.1% from 51,782.64 last week. It is up 7.8% year-to-date from 48,063.29 on December 31, 2025. The S&P 500 closed the week at 7,743.41, up 1.2% from 7,650.50 last week. The S&P is up 13.1% year-to-date from 6,845.50 on December 31, 2025. The Nasdaq closed the week at 27,068.72, up 1.9% from 26,552.55 last week. It is up 16.5% year-to-date from 23,241.99 on December 31, 2025.