Brought out the buyers

The deeper account

The morning belonged to the bond market. Overseas, Britain's thirty-year borrowing cost rose to its highest since 1998 and Italy's stock market fell 2.5 percent; at home the ten-year Treasury yield touched 5.36 percent, its highest since April 2002, and the thirty-year 5.73, its highest since May 2002. Before the open the Mortgage Bankers Association reported that the average thirty-year fixed rate had reached 7.49 percent, the highest in almost three years. "Very few homeowners have an incentive to refinance at these rates," said Joel Kan, its deputy chief economist. The S&P 500 opened at 7,792.98, 25.95 points under Tuesday's record and already under the August one, and fell to 7,763.34 by 10:53, down 55.59. At 12:59 it stood at 7,791.37, still under the line.

Then the auction. The Treasury sold $39 billion of ten-year notes at 5.300 percent — the highest yield at a ten-year auction since 8 November 2000, and 46.6 basis points more than at the last one, four weeks earlier. But the market had been trading the same notes at about 5.317 percent, and the auction cleared under that: bidders asked for less than they could have had. Bids totalled 2.77 times the notes on offer; indirect bidders — those who bid through an intermediary, foreign central banks among them — took 80.3 percent, and the primary dealers, who must bid and keep what nobody else wants, were left with 2.5 percent. "Bottom line, for whatever reason, likely the 24 yr highs in rates, brought out the buyers and resulted in a great auction," wrote Peter Boockvar of One Point BFG Wealth Partners; the ten-year yield, he noted, had backed off to 5.27 percent, from 5.31 just before the result.

The index answered almost at once. It barely moved in the first two minutes after the result, then rose 8.39 points in the minute from 1:02, to 7,798.11 — its best minute of the day — touched 7,799.45 at 1:03, and closed a minute above August's record of 7,798.99 for the first time at 1:08. Before one o'clock not one minute had closed above that line; of the 180 minutes after it, 144 did, and the index crossed the line seventeen times in all. It reached 7,807.02 at 3:02 and closed at 7,801.77, down 17.16, or 0.22 percent: 2.78 points above the record it broke on Tuesday, and below Tuesday's close for all 390 minutes. Only one close in the index's history is higher.

At two o'clock the Federal Reserve published the minutes of its September meeting, at which it raised rates for the first time since 2023, and they said more of the same was coming: "most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end." They named, among the reasons for higher long-term yields, "competition for capital from heavy private debt issuance to finance the development of artificial intelligence (AI) infrastructure," and noted that "financial conditions appeared to be supportive of economic growth, with equity prices having risen substantially this year." Participants "generally assessed inflation risk as skewed to the upside"; the staff expect inflation to reach 2 percent in 2029. The index moved less than eight points on them. The Fed meets again on 27 and 28 October.

Underneath the index the day was worse than it looked. The equal-weight fund fell 0.81 percent, nearly four times the index's 0.22, and the small-company fund 1.29. Ten of the eleven sectors fell. Industrials were the worst, down 2.18 percent: Caterpillar fell 5.75 percent to $813.83, taking most of the Dow's 341-point decline with it, and EMCOR fell 4.83, Allegion 4.70, United Rentals 4.00 and Deere 3.80. Materials fell 1.51 and real estate 1.29. Health care was the only sector to rise, 1.03 percent, with Moderna up 4.81. The power companies that rose on Tuesday kept rising: NRG 4.84 percent, Vistra 3.88. Micron rose 4.06 percent to $1,088.00, and Constellation Brands, the beer and wine company, rose 2.35 percent after a quarter that beat forecasts, having been down 7.1 percent before the open. Twilio, in its second day in the index, fell 2.64 percent, to $273.00. The gold fund fell 1.67 percent; the VIX rose 0.07, to 15.08.

The head of the International Monetary Fund, Kristalina Georgieva, put the morning in a sentence, in a speech: "Policymakers had a relatively easy ride over the last 17 years, as for all that time interest rates were stuck below GDP growth rates. Higher interest rates now put an end to that." At 3:00 the Federal Reserve reported that Americans' revolving credit, mostly credit cards, shrank at an annual rate of 4.2 percent in August. West Texas crude settled at $88.28, down $1.16, after the International Energy Agency agreed to speed up a release of reserve oil and put diesel first.

Two honest notes. The ten-year auction's figures are TreasuryDirect's; the market's 5.317 percent before the result is the when-issued yield as reported by financial wires, not an official figure, so the 1.7 basis points is theirs. Caterpillar's fall has been attributed to a broker's downgrade, but no named firm stands behind that report, so this page gives no reason for it.

In the photograph it is four o'clock on an October afternoon in farm country, and the man in the grey suit has just come down the hill. Behind him the lane drops off the hillside between a wall and a line of trees, so steep that most people would walk it, and crosses the stream on a little humped stone bridge. He has come over the bridge with his feet off the pedals and stuck out on either side, the way a boy does, his paper bag in the basket and a grin on his painted face, and the bicycle is still carrying him on what is left of the slope. He is not pedalling. He has not had to for a long way. The picture does not show where the lane goes next.