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* FIEND'S SUPERBEAR MARKET REPORT *

* September 29, 2026 *

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* e-mail: fiendbear@fiendbear.com *

* web address: http://www.fiendbear.com *

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Fiend Commentary
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The Bond Bear Wakes Up

How high can interest rates go?

That suddenly isn't an academic question.

The 10-year Treasury yield surged again Monday, closing around 5.24% before pushing above 5.27% overnight.

That is the highest level since 2007.

The 30-year moved above 5.5%.

Two weeks ago, 5% was the number everybody feared.

Monday it looked more like something the bond market barely noticed.

Stocks finally showed some discomfort. The S&P 500 fell 0.8%, the Nasdaq dropped 0.9% and declining stocks overwhelmed advancers by more than three to one on the NYSE.

But the larger story isn't Monday's stock decline.

It may be that the enormous 40-year bull market in bonds ended six years ago—and we are only beginning to understand what replaced it.

A 74-Year Round Trip

Bond markets operate on a scale much longer than most investors are accustomed to thinking about.

Stocks can have bull and bear markets lasting months or a few years.

Secular interest-rate cycles can last generations.

Consider the modern history.

In 1946, long-term U.S. government bonds yielded around 2.1%.

Then began one of the great bond bear markets in American history.

Remember that bond prices and yields move in opposite directions.

Rising yields mean falling bond prices.

Over the next 35 years, interest rates climbed gradually at first and then violently as inflation became entrenched during the 1970s.

By 1981, the 10-year Treasury yield exceeded 15%.

The Federal Reserve under Paul Volcker finally broke the inflation cycle by tightening monetary policy aggressively and refusing to reverse course when the economy weakened.

That was the turning point.

Then everything went the other direction.

Fifteen percent became 12%.

Then 10%.

Then 8%.

Then 6%.

Then 4%.

Then 2%.

And finally, during the pandemic panic of August 2020, the 10-year Treasury reached an astonishing record low of 0.52%.

From roughly 15% to half of one percent in four decades.

That may have been the greatest bond bull market we will ever see.

Now look at the chart in reverse.

0.52%.

1%.

2%.

3%.

4%.

5%.

And today, 5.27%.

Perhaps the next great secular move has already begun.

Thirty-Five Years Up, Forty Years Down

There is an interesting symmetry in the history.

The secular bond bear market that began after World War II lasted roughly 35 years, from 1946 to 1981.

The great decline in yields that followed lasted nearly four decades if we use the 2020 record low as the final bottom.

Nobody knows whether financial history will produce another neat 35- or 40-year cycle.

Probably not.

But it puts the current move into perspective.

If August 2020 marked the secular low in interest rates, the current bond bear market is only six years old.

Not 35.

Six.

That doesn't mean yields climb continuously for another generation.

The 1946-1981 bond bear contained recessions, falling-rate periods and tremendous bond rallies.

Neither did yields rise directly from 2% to 15%.

It took decades.

But the broad trend remained upward until something fundamental changed.

Inflation was finally defeated.

The question today is what would reverse the forces pushing rates higher now.

That answer isn't obvious.

Five Percent Isn't Historically High

This may be the biggest misconception created by the post-financial-crisis era.

A 5.25% 10-year yield sounds enormous.

Historically, it really isn't.

The 10-year averaged about 5.65% in 1968.

It averaged more than 6% throughout much of the 1970s.

It remained above 10% for several years during the early 1980s.

Even in 1998—hardly remembered as an era of crushing interest rates—the 10-year averaged roughly 5.26%.

Reuters technical analysis currently puts the 50-year moving average near 5.65%.

Think about that.

Today's supposedly shocking 5.27% yield remains below the average level of the past half century.

That doesn't make it harmless.

It tells us how abnormal the zero-rate era really was.

Perhaps 5% isn't exceptionally high.

Perhaps 1% was exceptionally low.

Then Why Does Five Percent Feel So Painful?

Because the economy adapted to cheap money.

That is the real problem.

A household buying a $400,000 house at a 3% mortgage lives in a completely different financial universe from one borrowing at 7%.

Private equity deals built around cheap leverage become much harder.

Commercial properties purchased using low capitalization rates become difficult to refinance.

Companies that borrowed cheaply have to roll debt at dramatically higher rates.

Governments experience the same problem.

The United States now carries more than $40 trillion in federal debt, with roughly $32 trillion held by the public.

Much of that debt was accumulated when financing costs were far lower. As older securities mature, portions are gradually refinanced at today's rates.

The economy doesn't need 15% Treasury yields to experience stress.

It has accumulated vastly more debt at much lower rates.

A body accustomed to sea level doesn't need Mount Everest to notice thinner air.

The 2020 Low Changed Everything

Think about what a 0.52% 10-year Treasury represented.

The government could borrow money for a decade at almost no nominal cost.

After inflation, investors were effectively accepting negative real returns.

Why?

The pandemic created extraordinary demand for safety.

The Fed cut short-term rates to zero.

The central bank bought enormous quantities of Treasuries and mortgage securities.

Inflation seemed dead.

Investors had spent decades being rewarded for buying every bond selloff.

Under those circumstances, paying almost any price for bonds seemed rational.

But mathematically, a 0.52% yield didn't leave much room for the bull market to continue.

Rates could go to zero.

Maybe slightly negative.

Then what?

The upside in bond prices was increasingly limited while the downside if inflation ever returned was enormous.

Inflation returned.

The bill followed.

From 0.52% to 5.27%

The magnitude deserves emphasis.

The 10-year yield has increased roughly tenfold from its 2020 low.

Not 50%.

Not double.

Tenfold.

Someone buying a 10-year Treasury yielding around half a percent in 2020 was locking in an extraordinarily low return just before the largest inflation outbreak in decades.

Long-duration bond investors suffered enormous losses as yields subsequently climbed.

And the current move may be breaking out again.

The 10-year recently crossed a technical level around 5.15% that had contained yields for years.

Reuters' technical analysis identifies the 2007 high around 5.33% as the next obvious historical level.

Above that sits the 50-year moving average around 5.65%.

Beyond that, charts begin pointing toward the low-6% area.

Technical analysis doesn't predict the future.

But it tells us something useful.

There isn't some giant historical wall immediately above 5.25%.

There is a lot of open air.

Could Six Percent Really Happen?

Six percent sounds outrageous after the financial world we grew accustomed to.

Historically, it isn't outrageous at all.

That does not mean the 10-year is going there.

The current move is extremely stretched, and after such a violent September selloff a major bond rally would be completely normal.

Indeed, technical measures show yields are heavily overbought.

The 10-year could drop 30 or 40 basis points and still remain in a rising long-term trend.

But suppose inflation settles around 3% rather than returning to 2%.

Investors might reasonably demand a 2% or 3% real return for lending money for ten years.

Three percent inflation plus a 2.5% real return gets you to 5.5%.

Add a larger term premium for fiscal uncertainty and enormous Treasury issuance and 6% stops sounding bizarre.

It simply becomes expensive.

There is a difference.

The Government Has Changed the Equation

The previous great bond bear occurred alongside rising inflation, energy shocks and growing federal deficits.

There are obvious differences today.

But there are uncomfortable similarities.

Federal debt has passed $40 trillion.

Budget deficits remain unusually large for an economy that is not currently in a deep recession.

The government must continually refinance existing debt while issuing new debt to cover additional deficits.

At the same time, private borrowers are demanding enormous amounts of capital.

The AI boom itself is becoming a competitor for money.

Large technology companies have issued more than $200 billion of bonds this year to finance data centers and infrastructure.

There is only so much capital available at any given price.

Government wants money.

AI wants money.

Corporations want money.

Homebuyers want money.

Consumers want money.

Price clears the market.

The price of money is the interest rate.

Perhaps the bond market is simply saying that 4% wasn't enough.

Then 5% wasn't enough.

Now it is searching for the number that is.

This Changes What Everything Is Worth

Interest rates don't merely affect borrowers.

They affect valuation.

Every financial asset ultimately competes against the risk-free rate.

Consider a stock trading at 25 times earnings.

Invert the P/E ratio and its earnings yield is 4%.

At 30 times earnings, the earnings yield is about 3.3%.

Now put a 10-year Treasury beside it yielding 5.25%.

The Treasury offers more current yield without the business risk.

That does not automatically make the stock overpriced.

Companies can grow earnings.

Dividends can increase.

A successful business can compound for decades.

A Treasury coupon cannot.

But the hurdle has changed enormously.

When Treasuries yielded 0.5%, a 4% earnings yield looked fantastic.

At 5.25%, investors can reasonably ask:

Why am I taking this risk?

The company had better have a good answer.

The Higher the Yield, the Harder the Question

This matters particularly for growth stocks.

A large portion of a growth company's value comes from profits expected many years into the future.

Those future dollars have to be discounted back into today's dollars.

The higher the discount rate, the less those distant profits are worth today.

This is basic finance.

At ultra-low interest rates, tomorrow's earnings are extremely valuable.

At higher rates, current cash flow matters more.

That doesn't mean Nvidia, Apple or other technology leaders automatically collapse because the 10-year reaches 5.5%.

Earnings growth can overpower the discount-rate effect.

That has largely happened so far.

But rates keep raising the hurdle.

At 5%.

At 5.5%.

At 6%.

Eventually even excellent companies can become poor investments if the price paid for them assumes a world of cheap money that no longer exists.

The Economy Has the Same Math

Businesses face the identical calculation.

Suppose a company considers building a factory expected to earn a 7% return.

When money costs 3%, that project looks attractive.

When financing costs 6%, perhaps it doesn't.

So the factory isn't built.

Workers aren't hired.

Equipment isn't purchased.

Construction doesn't occur.

That is how high rates eventually slow an economy.

Housing responds similarly.

At some mortgage rate, the buyer simply cannot afford the payment.

Commercial real estate projects no longer pencil out.

Leveraged acquisitions stop working.

Private-equity returns shrink.

Consumers postpone financed purchases.

This is monetary tightening even if the Federal Reserve does absolutely nothing.

The bond market can tighten the economy on its own.

And Then There Is Inflation

There is an especially nasty part of the current cycle.

The cost of money is rising at the same time the value of money is declining.

Inflation means a dollar buys less.

Higher interest rates mean acquiring that dollar costs more.

Businesses therefore face pressure from both directions.

Materials cost more.

Energy costs more.

Labor costs more.

Financing costs more.

The obvious solution is raising prices.

Which creates more inflation.

Eventually demand weakens enough to interrupt that cycle.

The question is how much economic damage is required before we get there.

That is why the current bond selloff matters far beyond anyone actually owning bonds.

The bond market is gradually repricing the entire economy.

Stocks Have Mostly Ignored It

This remains perhaps the strangest part of 2026.

September is heading toward one of the worst months for government bonds in years.

The 10-year is up roughly 50 basis points this month.

Two-year yields have risen almost 60 basis points.

Bond-market volatility has surged.

And during the same month, the Nasdaq and S&P 500 made record highs.

That cannot continue indefinitely unless corporate earnings grow fast enough to offset the increase in discount rates.

Maybe they will.

The AI boom is real.

Economic growth has remained strong.

Corporate profits have been excellent.

But the competition from bonds is becoming something equity investors haven't experienced in roughly two decades.

One strategist put it rather plainly Monday: interest rates are becoming attractive relative to stocks for the first time in close to 20 years.

Money notices alternatives.

The Breaking Point May Be Lower This Time

This is another reason comparing today's 5.25% to the 15% rates of 1981 can be misleading.

We probably don't need 15% to break something.

The economy is much more leveraged.

Federal debt is vastly larger.

Asset valuations are higher.

Homes cost far more relative to household incomes.

Commercial real estate was financed during an era of exceptionally cheap money.

Modern finance contains enormous amounts of leverage that did not exist in the same form 45 years ago.

So today's breaking point might be 6%.

Or 7%.

Or perhaps something fails before then.

Nobody knows.

JPMorgan strategists recently suggested the danger zone for the 10-year could be somewhere around 5.5% to 6%.

We are suddenly not very far away.

How Do Bond Bears End?

History provides a fairly simple answer.

They end when the forces driving yields higher finally reverse.

The 1946-1981 bear market ultimately ended because inflation was crushed.

Not managed.

Not talked down.

Crushed.

The federal funds rate approached 20%.

The economy entered a severe recession.

Unemployment approached 10%.

Construction and manufacturing were hit particularly hard.

Long-term yields initially kept rising because investors doubted whether Volcker would withstand the political and economic pressure.

Then he did.

Once markets believed inflation would actually be defeated, the bond bull market could begin.

Today's circumstances don't require anything remotely that severe.

At least not yet.

But the principle hasn't changed.

A secular bond bear probably does not end because yields simply look high.

It ends when investors become convinced that the problem creating those yields has been solved.

Which problem has been solved today?

Inflation?

No.

Federal deficits?

No.

Government debt growth?

No.

Energy uncertainty?

No.

Heavy demand for capital?

No.

That doesn't sound like the end of a secular trend.

2020 May Have Been More Important Than We Realized

Market turning points are easiest to recognize years later.

In August 2020, a 0.52% Treasury yield felt like another milestone in the same trend investors had known for decades.

Lower forever.

Central banks could always ease.

Inflation was dead.

Bonds always rallied eventually.

Perhaps instead it marked the endpoint of an era.

The great bond bear began around 1946.

The great bond bull began around 1981.

The next great bond bear may have begun in 2020.

If so, today's 5.27% yield isn't necessarily the shocking endpoint of the move.

It may simply be the first level high enough to make everyone realize the cycle changed.

There will be enormous bond rallies along the way.

There will be recessions.

The Fed will eventually cut rates again.

Inflation will fluctuate.

Yields may someday plunge from 6% back to 4%.

None of those moves would necessarily invalidate the larger trend.

Secular markets are measured in decades, not Fed meetings.

Cheap Money Made Everything Worth More

There is one final consequence worth considering.

For 40 years, falling interest rates provided an enormous tailwind to almost every asset.

Bonds rose because yields fell.

Stocks benefited because lower discount rates justified higher valuations.

Homes became more affordable to finance.

Commercial real estate values rose.

Private equity flourished.

Governments borrowed more cheaply.

Leverage became increasingly rewarding.

The cost of capital kept declining.

Now imagine that entire process running slowly in reverse.

Bonds lose value as yields rise.

Stocks face lower valuation multiples.

Housing affordability deteriorates.

Real estate capitalization rates rise.

Leveraged investments become less attractive.

Governments devote more revenue to interest.

Capital becomes expensive again.

This doesn't happen overnight.

It doesn't require a crash.

It is a gravitational force.

And after spending decades with gravity getting weaker, markets may have forgotten what normal gravity feels like.

Maybe 5.25% Isn't High at All

That may be the most uncomfortable conclusion.

We look at a 5.27% Treasury yield and ask:

How much higher can this possibly go?

History looks back and asks:

Why do you think 5.27% is high?

The 50-year moving average is around 5.65%.

The 10-year spent years above 7%.

It spent years above 10%.

It eventually topped 15%.

None of that means history has to repeat.

A short-term bond rally is probably becoming increasingly overdue after such an extended selloff.

But the secular question is different.

The financial world built after 2008 assumed that money would remain extraordinarily cheap.

The bond market may now be dismantling that assumption one basis point at a time.

The 10-year was 0.52% in 2020.

It is above 5.25% today.

That looks like a huge move.

If this really is the beginning of another generational bond bear market, someday we may look back and realize it wasn't.

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