September 30, 2026 | Market Commentary | Bond Selling Continues Unabated: Quarter-End Reached with Interest Rates at 19-Year Highs
This report is based on information as of 8:29 PM JST on September 30, 2026.
The data reference times for each market are as follows:
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US Stocks: Closing prices on September 29, 2026 (EDT)
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European Stocks: Prices as of 8:29 PM JST on September 30, 2026 (during trading)
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Nikkei 225: Closing price at 3:30 PM JST on September 30, 2026
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China/Hong Kong Stocks: Closing prices on September 30, 2026
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Currencies, Bonds, Crude Oil, Gold, and Crypto Assets: Prices as of 8:29 PM JST on September 30, 2026 (during trading)
Introduction
On the final day of the third quarter of 2026, global bond markets are facing the reality of “19-year high interest rate levels.” The US 10-year Treasury yield has reached **5.23%**, with a monthly increase of approximately 50 basis points in September, marking the largest monthly rise in two years. The greatest risk is a scenario where persistent energy prices and expectations of further Fed rate hikes combine to create simultaneous headwinds for a wide range of assets, including stocks, bonds, and real estate. The focus moving forward is on the PCE inflation indicator to be released today and the employment report on October 2. These figures will determine the Fed’s next move.
Conclusion
Today, at the end of the quarter, the theme dominating the market is “how long will high interest rates persist?” The Fed raised the policy rate to **3.75–4.00%** on September 16, marking the first rate hike since 2023. The prolonged conflict in the Middle East is pushing up energy inflation, and large-scale government bond issuance is weighing heavily on the bond market. Meanwhile, expectations for AI-related sectors are supporting the stock market, keeping US stock declines modest. Japanese stocks have continued to rise significantly, and Asian markets remain resilient.
Current State of Global Markets
[US Stock Market] (Closing prices on September 29, 2026)
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NY Dow: 51,349.92 (down 0.26% from the previous day)
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S&P 500: 7,670.84 (down 0.17% from the previous day)
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Nasdaq Composite: 26,797.54 (down 0.09% from the previous day)
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Russell 2000: 4,235.50 (down 0.35% from the previous day)
US stocks closed slightly lower. While rising bond yields and persistent crude oil prices acted as a burden, strong expectations for AI-related stocks kept the Nasdaq’s decline limited. The small-cap Russell 2000 index fell **-5.45%** for the month of September, significantly underperforming large-cap stocks. As rising interest rates directly impact the financing costs of small and medium-sized enterprises, the environment remains particularly harsh for small-cap stocks.
[European Stock Market] (As of 8:29 PM JST on September 30, 2026, during trading)
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UK FTSE 100: 10,647.11 (up 0.10% from the previous day)
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German DAX: 25,333.82 (down 0.16% from the previous day)
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French CAC 40: 7,991.65 (down 0.55% from the previous day)
Europe is facing concerns of “stagflation,” where high inflation and economic slowdown overlap. In Germany, the number of unemployed in September recorded a significantly larger increase than expected (discussed later), shaking the foundations of Europe’s largest economy.
[Asian Stock Markets] (Closing prices for each market)
The Nikkei 225 closed the quarter with a significant gain of 1,272.45 points. The rise on this day will be explained in detail in a later chapter.
Important News
1. Carnival Earnings, All-Time High
Cruise giant Carnival (CCL) announced its third-quarter earnings on September 29, 2026, marking the best performance in the company’s history. Revenue, net income, and yield per berth all exceeded the guidance from June, and the stock price surged **+13.41%** in regular trading to close at $25.11.
The company has raised its full-year 2027 EPS (earnings per share) forecast to $2.24, a result that demonstrates the resilience of travel spending. However, rising fuel prices have acted as a headwind of $0.11 per share, and if crude oil prices remain at high levels, it could impact 2027 earnings as well.
2. President Trump Signs AI Document
President Trump signed an AI-related document on September 29 (local time) in Washington alongside key executives from the technology industry. The President described the document as “in a sense, like a constitution” and stated that it has “moral binding force.” He also revealed that he is considering the establishment of a “committee of about 10 people” to oversee AI as a whole.
The Trump administration has maintained the position that “no new regulations specifically for AI are necessary,” and this document is a framework for self-regulation rather than legal regulation. The market has interpreted this move as a short-term retreat in regulatory risk for AI, providing a tailwind for semiconductors, data centers, and cloud infrastructure. On the other hand, there are skeptical views regarding the effectiveness of self-regulation.
3. President Trump Denies Easing Iran Sanctions
President Trump strongly denied on Truth Social an Axios report claiming that the U.S. had proposed easing sanctions on Iran, stating, “It is not true. I have not offered anything.” While Qatar continues to mediate as the Middle East war persists, both sides are considered pessimistic about an agreement before the U.S. midterm elections (Reuters report).
According to reports, Saudi Arabia resumed oil shipments from the Red Sea port of Yanbu in September, and crude oil exports from Middle Eastern oil-producing countries recovered to 16.32 million barrels per day in September, the highest level since the start of the war. Nevertheless, crude oil prices rose as the stance of “no lifting of sanctions” became clear.
4. Concentrix: Trials in the AI transition era
Customer experience company Concentrix (CNXC) announced its fiscal Q3 2026 results on September 29.
Non-GAAP EPS was $2.92, beating estimates by $0.21, but revenue came in at $2.45 billion, missing market expectations by approximately $30 million. The company highlighted an AI transition milestone, noting that “projects acquired and deployed within three years of AI solution implementation already account for 50% of revenue,” but the sluggish revenue growth was poorly received, and the stock fell **-9.77%** in after-hours trading.
Terminology: Non-GAAP (non-official accounting standards) is a profit metric calculated by companies excluding temporary special expenses, etc., and is referenced to grasp the actual earning power.
5. Chinese exporters: Surging foreign exchange losses
In a report dated September 30, UBS pointed out that the total foreign exchange losses of non-financial A-share listed companies in China in the first half of 2026 reached 107 billion yuan, equivalent to **5.5%** of total net profit. This is a sharp increase from the 2015–2025 average of 0.4%.
The background lies in the appreciation of the yuan since the dollar-weakness phase in April 2025. The yuan rose approximately 9.5% against the dollar from its low on April 9 to September 21, briefly falling below 6.70. Losses incurred when converting dollar-denominated export earnings into yuan are expanding. The foreign exchange hedging ratio for Chinese companies remained at 30% as of 2025, which is lower than that of Japanese listed manufacturers (where approximately 80% utilize hedging), leading to the expansion of losses.
6. Notable stocks driving Japanese equities (UBS analysis)
In a report dated September 30, UBS analyzed the macro sensitivity of Japan’s Topix 500 stocks. The report pointed out that in the Nikkei 225, a shift from growth-momentum-led to value and low-risk stocks was observed in September.
Tokyo Electron, Sumitomo Electric Industries, Sumitomo Mitsui Financial Group, and Recruit Holdings were cited as standing out across multiple indicators in the long (buy) direction. Additionally, shareholder returns in Japan are expected to reach a record pace in 2026, and the ongoing unwinding of policy-held shares (cross-holdings) is also being evaluated as a structural support factor.
US Market and Monetary Policy
Why are interest rates rising?
The sharp rise in US Treasury yields in September 2026 involves multiple intertwined factors.
Factor 1: The Fed resumes interest rate hikes The Fed raised the policy interest rate by 25 basis points to **3.75–4.00%** at the FOMC (Federal Open Market Committee) meeting on September 16. This is the first rate hike since 2023. In the latest dot plot (the distribution chart of Fed members’ interest rate forecasts), many members expect one more rate hike within the year.
Terminology: Basis points are a unit of interest rate, where 1 basis point = 0.01%. 25 basis points means 0.25%.
Factor 2: Middle East war and energy inflation The armed conflict between the US/Israel and Iran, which began at the end of February 2026, has already lasted more than seven months, pushing up energy prices. This has created concerns about the re-acceleration of inflation, causing the bond market to retreat from expectations of interest rate cuts.
Third Factor: Massive U.S. Treasury Issuance As the U.S. government’s fiscal deficit expands, the supply of government bonds to the market is increasing. The supply-demand balance has been disrupted, leading to a continuing pattern of falling prices (which means rising yields).
Terminology: A bond’s “yield” is the annual rate of return obtained when holding the bond. When bond prices fall, yields rise, and when bond prices rise, yields fall.
Fourth Factor: BOJ Rate Hikes and Selling by Japanese Investors There is growing awareness of the possibility that the Bank of Japan may sell its holdings of U.S. Treasuries to improve investment yields within Japan, and the actions of Japan, the world’s largest holder of U.S. Treasuries, are being closely watched.
Current State of U.S. Treasury Yields
As of 8:29 PM on September 30 (Japan Standard Time):
The 10-year Treasury yield rose by approximately 50 basis points in September alone, hovering near levels not seen in 19 years. The 30-year bond reached a high of 5.62% this month, a level not seen since 2002.
Terminology: Long-term interest rates refer to the yields on long-term government bonds such as 10-year or 30-year bonds, and they widely influence mortgages, corporate capital investment, and stock valuations.
Remarks by New York Fed President Williams
New York Fed President John Williams stated in a speech at the University at Buffalo on September 29 (local time) that “there is no need to rush to take the next step after the September rate hike.” However, he also added that “if inflation proceeds as expected, another rate hike within the year may be appropriate,” meaning he has not declared an end to rate hikes.
According to the CME Group’s FedWatch tool, multiple media outlets have reported that the market is pricing in an approximately 70% probability of a rate hike at the October 27-28 FOMC meeting (based on reports as of September 30, 2026). President Williams’ remarks may have slightly tempered this expectation. As of 21:19, it is 55.2%.
FedWatch Link:
Today’s Key Indicators (U.S.)
As of the time of writing (8:29 PM), the following two indicators are scheduled to be released:
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August PCE Inflation Index (Personal Consumption Expenditures Price Index): Market expectations for core PCE are around +3.4% year-on-year. This is the inflation indicator most closely watched by the Fed.
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ADP Private Employment (September): Market expectations are +73,000 (previous: +38,000).
Terminology: PCE stands for “Personal Consumption Expenditures Price Index,” which is the inflation indicator the Fed relies on most heavily for its monetary policy decisions. The Fed’s target is 2%.
European Market
Deterioration in German employment
According to reports, the number of unemployed people in Germany in September rose by 12,000 from the previous month to 3.01 million on a seasonally adjusted basis, significantly exceeding the market forecast of +1,000. The unemployment rate remains high at 6.4%. The head of the Federal Employment Agency stated that the autumn recovery, which usually begins in September, is lagging this year, and pointed to cost-cutting in the automotive industry and the high number of corporate bankruptcies as structural problems.
Furthermore, prices rose in several German states in September, indicating that the impact of rising energy prices due to the Middle East war is spreading to domestic inflation. The German economy is showing signs of “stagflation.”
Terminology: Stagflation is a state in which economic stagnation and inflation occur simultaneously, a situation that makes it difficult for central banks to respond.
The German DAX is currently trading slightly lower at -0.16% compared to the previous day (as of 8:29 PM).
Bullish factors for Europe include the relative resilience of consumer sectors in countries like France and Italy, and the European Central Bank’s cautious control of the pace of future interest rate hikes. Bearish factors include the slump in German manufacturing, soaring energy import costs, and the prolonged situation in the Middle East.
Japanese Market and Foreign Exchange
Background to the Nikkei surge
The Nikkei Stock Average closed the quarter on September 30 at 66,753.72 yen, a significant consecutive gain of **+1.94% (+1,272.45 yen)** from the previous day.
There are several factors considered to be behind the rise. These include rebalancing (adjustment of asset allocation) buying by institutional investors toward the end of the quarter, the continued inflow of funds into AI-related stocks, and the appreciation of Japanese companies’ structural reforms and strengthening of shareholder returns. As UBS points out, shareholder returns are expected to reach a record pace in 2026, and the trend of unwinding cross-shareholdings is also supporting the market.
On the other hand, Japan’s industrial production for August, announced on September 30, fell by 1.7% from the previous month, marking the second consecutive month of decline and confirming the weakness in the manufacturing sector. Caution is required regarding the divergence between the significant rise in the index and economic indicators.
Foreign Exchange: Dollar/Yen in the 157 yen range
Trading as of 8:29 PM (Japan Standard Time) on September 30:
The BOJ raised its policy interest rate by 0.25% to **1.25%** on September 18, reaching its highest level in 31 years. However, the gap with the Fed’s policy interest rate (3.75–4.00%) remains large, and the environment remains difficult for the yen to appreciate.
Bullish factors: If expectations for further interest rate hikes by the BOJ rise, the yen may head toward appreciation due to the narrowing of the Japan-US interest rate gap. Bearish factors: If the prolonged situation in the Middle East outweighs concerns about cost increases due to higher crude oil prices over risk-averse yen buying, downward pressure on the yen will continue.
Terminology: The interest rate gap refers to the difference in policy interest rates between two countries. Since funds tend to gather in currencies with higher interest rates, the larger the Japan-US interest rate gap, the more likely the yen is to weaken and the dollar to strengthen.
The Japanese 10-year bond yield is at 3.061% (as of 8:15 PM), also trading at a multi-decade high. It rose 42 basis points in September alone, marking the largest quarterly increase in over 20 years.
China/Asia Markets
China PMI: Manufacturing enters expansion territory
Chinese economic indicators released on September 30 showed overall improvement.
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Manufacturing PMI (Official): 50.1 (Previous month 49.8, Forecast 50.1)
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Non-manufacturing PMI (Official): 50.2 (Previous month 49.0, Forecast 49.2)
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Composite PMI (Official): 50.7 (Previous month 49.5)
Terminology: PMI (Purchasing Managers’ Index) is a business sentiment index based on surveys of purchasing managers at manufacturing and non-manufacturing companies. A reading above 50 indicates economic expansion, while below 50 indicates contraction.
The fact that the manufacturing PMI exceeded 50 in both official and private surveys is bright news for the end of the quarter. However, the Shanghai Composite Index fell **-2.78%** in September, and market reaction remains limited despite the strong economic data.
The background includes the aforementioned increase in foreign exchange losses for exporters, continued tensions between the U.S. and China over trade, AI, and Taiwan issues, and a risk-off mood driven by a global bond sell-off.
Crude Oil, Gold, and Crypto Assets
Crude Oil: Middle East risks reignite
Trading as of September 30, 8:29 PM (Japan Time):
President Trump’s complete denial of easing sanctions on Iran has caused risk premiums (the additional price added to reflect geopolitical uncertainty) to rise again. Brent is expected to rise **+14%** in September, marking its largest monthly gain since July.
Terminology: A risk premium is the additional amount added to a price to account for uncertainties such as war or supply disruptions.
Bullish factors: If the situation where there is no prospect of lifting sanctions continues, supply concerns will further intensify. Bearish factors: Some view that the damage to actual supply is limited, as export volumes from Middle Eastern oil-producing countries have already recovered to their highest levels since the start of the conflict.
Gold: Demand as a Safe-Haven Asset
Trading as of 8:29 PM (JST) on September 30:
Rising interest rates are typically a headwind for gold. Because gold is a non-interest-bearing asset, it competes with high-yield bonds. Nevertheless, the reason gold prices remain resilient is likely due to the prolonged situation in the Middle East and the inflow of funds into gold as a safe-haven asset amid global inflation concerns. While it has fallen -6.97% for the month of September, it is rebounding today.
Crypto Assets
Trading as of 8:29 PM (JST) on September 30:
Crypto assets are generally trading slightly lower. This is influenced by a cautious stance toward risk assets as a whole.
Three Future Scenarios
Bullish Scenario
Trigger: If today’s PCE inflation index comes in below expectations and the October 2nd employment report also shows moderate figures, expectations for additional Fed rate hikes will recede, putting a stop to the bond sell-off.
Market Impact: Long-term interest rates will decline, making both stocks and bonds easier to buy. Growth stocks and the real estate sector, which are particularly sensitive to interest rates, may benefit.
Assets and Sectors Likely to Benefit: Technology/AI-related stocks, real estate investment trusts (REITs), and long-term government bonds.
Assets and Sectors Likely to be Negatively Affected: Crude oil and energy stocks (adjustments during risk-on phases).
Indicators to Watch: August Core PCE (today), September employment report (October 2nd).
Neutral Scenario
Trigger: Inflation indicators are generally in line with expectations, and the Fed maintains a “data-dependent” stance. Whether or not there will be a rate hike at the October meeting remains fluid for the rest of the year.
Market Impact: Interest rates remain high, and the stock market continues to see a “selective market” driven by AI-related and high-priced stocks. Small and mid-cap stocks may continue to struggle due to rising financing costs.
Terminology: A selective market refers to a market where, while the overall market lacks a clear direction, funds concentrate only on stocks with good earnings or specific themes.
Assets and sectors likely to benefit: Large-cap AI-related tech stocks, consumer-related sectors such as cruises and travel (as evidenced by Carnival’s strong earnings).
Assets and sectors likely to be negatively impacted: Small-cap stocks, real estate, and interest-rate-sensitive sectors.
Indicators to watch: The FOMC statement on October 27–28 and the contents of quarterly earnings reports.
Bearish Scenario
Trigger: PCE significantly exceeds expectations, and conflict in the Middle East intensifies, causing crude oil prices to surge. The possibility of the Fed raising rates in both October and December suddenly emerges.
Market impact: A phase where both bonds and stocks are sold simultaneously. In particular, if the possibility of long-term interest rates heading toward 6% is realized, valuations (indicators showing whether a company is undervalued or overvalued) will be reassessed, putting downward pressure on the entire stock market.
Terminology: Valuation is a general term for measures used to determine whether a stock is overvalued or undervalued by comparing the stock price to a company’s earnings, assets, and cash flow.
Assets and sectors likely to benefit: Energy stocks, gold, and short-term US dollar-denominated assets.
Assets and sectors likely to be negatively impacted: Growth stocks, emerging market currencies and stocks, and real estate.
Indicators to watch: Core PCE month-over-month (whether it exceeds 0.3%), progress in diplomatic negotiations regarding Iran, and demand for US Treasury auctions.
Indicators to keep an eye on
Scheduled for release today (September 30)
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US August PCE Inflation Index (Core year-over-year forecast: +3.4%): The most important indicator directly linked to the Fed’s policy decisions.
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US ADP Private Employment (September, forecast: +73,000): Watched as a leading indicator for the official employment report on October 2.
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Micron’s earnings report tomorrow morning will be a focus.
This week (October 2, 2026)
Next month
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October 27–28: FOMC meeting. The biggest focus is whether there will be an additional rate hike.
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European budget deliberations (French fiscal policy, UK budget proposal): There is a risk that fiscal concerns will spill over into the European bond market.
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U.S. Midterm Elections (November 3): As pointed out by Wolfe Research, this will impact policy uncertainty.
Summary
Looking back at September, the factor that moved global markets the most was “interest rates.” The convergence of three forces—the resumption of Fed rate hikes, energy inflation due to the Middle East war, and large-scale government bond issuance—caused the U.S. 10-year Treasury yield to rise by approximately 50 basis points in September alone. This marks the largest monthly increase in two years, with the 30-year bond reaching its highest level since 2002.
On the other hand, expectations for AI-related stocks and the resilience of corporate earnings supported the stock market, and Japanese stocks closed the quarter with significant gains. China’s manufacturing PMI has also returned to the expansionary zone, and for now, a “sharp decline” has been avoided across Asia.
The PCE inflation data and employment statistics to be released from tonight through next week will serve as a critical turning point in determining the direction of the market in October.
About the Sources
This article refers to the following sources.
Market data fluctuates depending on the update time, so please reconfirm the latest information at the time of publication.
Notice regarding AI usage
This article was compiled and edited using AI. AI may make errors in numbers, dates, news summaries, translations, and the organization of causal relationships. When using this for investment decisions, please verify the latest information through official statistics, central banks, government agencies, and multiple news outlets.
This article is for informational purposes only and does not recommend any specific financial products or transactions. Please make investment decisions based on your own financial situation, investment objectives, and risk tolerance.