Investment Insights — Week of October 19, 2026

Hi, I'm Tim Gereg, Head of Capital Solutions at Texas Capital.

Last week was a good reminder that the bond market doesn't always trade the headlines. September's inflation data came in much hotter than expected, and yet rates ended the week lower across the curve. The 10-year Treasury ended the week down 16 basis points to 507, nearly 30 basis points off the recent highs, while the two-year was down eight basis points to 470.

The news everyone was waiting for last week was September's inflation data, which came in hotter than expected. CPI came in at 0.6% for the month and 3.7% year on year. Core was slightly above estimates as well, at 2.6% year on year. By some estimates, just over half of that upside surprise came from owners' equivalent rent, or OER, the government's estimate of what homeowners would pay to rent their own homes. The market typically discounts OER as it doesn't reflect prices actually paid, and it carries much less weight in the Fed's preferred PCE gauge. Immediately after the CPI release, the two-year spiked nearly 20 basis points to 4.95%, then spent the rest of the day grinding lower to finish almost flat. 

Even though we know inflation remains the Fed's primary focus, cold water had already been splashed on the prospects of an October hike by Jefferson and Williams in weeks prior, and the market is instead looking forward to a December hike, which I currently believe has a very high bar for inactivity. The PPI print was even more surprising. Headline rose 1.3% versus 0.6% expected, the biggest monthly gains since March of 2022, and core rose 0.7%. 

While inflation was the most anticipated data of the week, the biggest catalyst for the move was actually the AI trade, specifically, concerns over how the debt-funded buildout gets financed at higher rates, which hit technology stocks hard. That move bled into credit. The gap between high-yield and investment grade spreads hit a one standard deviation move above its average since 2024. 

We also saw oil grind higher. WTI was up more than 10% on the week, which is an interesting divergence from recent correlation, where the price of oil and Treasury yields had been moving in relative lockstep. At the same time, equities fell while treasuries rallied. That's the normal risk-off relationship you'd expect, but not one we've seen consistently for over a year. 

This week, the Fed is in blackout ahead of its October 28 decision, and the data calendar is very light. Instead, the market will be focused on the AI narrative, more Q3 earnings and any developments in the Iran war. That's it for this week. Let us know how we can help.