A brutal September for bonds signals an even darker October.
Investors who were counting on a swift easing of monetary policy by central banks have been forced to brutally revise their assumptions. The message is clear – interest rates will remain high for much longer.
September brought a sell-off in the global debt market, pushing long-term government bond yields to levels not seen in over a decade. Investors who were counting on a swift easing of monetary policy by central banks have been forced to brutally revise their assumptions. The message from the Federal Reserve and the European Central Bank has become unequivocal – interest rates will remain high for much longer than the market consensus had assumed. This shift in narrative triggered a sharp drop in bond prices, which translated into direct losses in the portfolios of investment funds and commercial banks worldwide.
Analysts warn that the start of October could bring even greater volatility and deeper declines. The main factor driving selling pressure is the record issuance of new debt by the US Treasury, which must finance a growing budget deficit amid drastically higher interest costs. The situation is further complicated by the fact that traditional, major buyers of US securities, such as foreign central banks and the Federal Reserve itself through its quantitative tightening programme, are withdrawing from the market or drastically reducing their purchases. As a result, the lack of sufficient liquidity on the demand side is forcing yields higher, which worsens credit conditions in the real economy and increases the risk of a sudden rupture in the global financial system.
Source: own analysis, as of 02.10.2026.
This paralysis in the bond market is entering a phase that investors call a dangerous race against time. The flight from the “Term Premium.” For years of zero interest rates, investors bought 10-year or 30-year bonds with a minimal risk premium. Today, having realised that inflation and deficits are not going away, they demand a much higher compensation for locking up cash for decades. This means that even if the Fed stops raising short-term rates, the long end of the curve (10- and 30-year bonds) may continue to rise autonomously, driven solely by supply. Another factor is the feedback loop on the deficit. The higher bond yields rise, the more governments must spend solely on servicing interest on existing debt. In the US, debt servicing costs have already exceeded defence budgets. To pay this interest, the government must issue even more bonds. The bond sell-off is fuelling the need to issue new bonds — a classic case of a market feedback loop. Now, the crack in the debt market is leading the stock market. History has repeatedly shown (including in 1987 and 2008) that equity markets can ignore what is happening in bonds for a long time, living in their own euphoria. However, once the yield on safe government bonds rises to levels competing with the earnings yield of listed companies, capital eventually abandons risk and flees equities. A bond sell-off is usually a quiet harbinger of what is about to happen to stock indices.
Summary of the session in Europe and the US
On the exchanges of the Old Continent, the week began with considerable volatility, and yesterday's trading ended with a sell-off in equities. There is no shortage of negative signals coming from the bond market, and their rising yields may be a cause for concern. All leading indices lost between 1.03% (Dax) and 2.21% (FTSE MIB).
On Wall Street, investors are dealing with a rotation of capital. AI-related companies remain highly valued, but traditional sectors have come under pressure. Yesterday, after an initial sell-off, buying managed to pull indices into symbolic positive territory. The Dow Jones gained 0.04%, the S&P500 rose by 0.19%. Only the technology-focused Nasdaq gained 0.04%.
Asian markets without direction
For the past ten weeks, Asian markets have been searching for direction. Today's session is unfolding in a worse mood. Investors are focusing on instability in the Middle East, which is limiting oil supplies, as well as on the prospect of further rate hikes this year. The Nikkei 225 is down 1%. The Australian S&P/ASX 200 is up 0.7%. The South Korean KOSPI is up 0.3%. Among other exchanges: Hong Kong (-2.5%), Sensex (-0.8%), Singapore (-0.3%).
Summary of the session on the WSE
October began with declines on global stock exchanges, which also impacted our market. Signs of bull-market fatigue are visible on global exchanges. The uptrend that began in July appears for now to be unthreatened, but a correction seems to be in the air. On the WIG20, the June declines were halted at local support around 3553 points, from where a solid buying reaction was seen. For now, there is no sign of fear. However, uncertainty is appearing in the quotations of European indices. The situation in the global risk-asset market is highly dynamic and tense. The biggest problem for markets and directly for Wall Street in the short term is not the prospect of interest rate hikes, but the rapidly rising bond yields, as the Treasury has halved the scale of its bond purchases. Combined with the simultaneous acceleration of lending activity, this is draining capital from the system. Much will depend on the US bond market. Rising yields will intensify anxiety, which in turn will lead to higher financing costs for business activity. Our market is not detached from the rest of the world, and if scepticism returns to global exchanges, a correction should be taken into account.
Broad market turnover amounted to PLN 2.8 billion. The WIG lost 1.64%. The blue-chip index lost 1.9%. The WIG20 futures fell by 2.25%. Mid- and small-cap companies were also part of the market picture. The mWIG40 lost 1.11%. The sWIG80 ended the day down 0.12%.
The zloty has been under pressure since the beginning of the year
GBPPLN – the pair is currently trading at 5.13.
EURPLN – today the euro is valued at 4.37.
USDPLN – the dollar is trading today at 3.88.
CHFPLN – currently, one franc costs 4.68.
PLNJPY – the pair is trading at 40.60.
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