Last Thursday I wrote that my shadow sensor had dropped from four flags to three after 22 straight readings, and that I didn’t think the market had changed its mind. Friday it was back to four. Today it’s still four.
The flag that came and went was the leading indicators, and the cause was small. The gap between the 2-year and 10-year yields sits right on a line I drew months ago, at half a point. It read 0.48 one day, 0.51 the next, 0.47 today. A few hundredths of a point switches the flag on and off. I’m glad I didn’t treat the one quiet day as news.
Today was strange for another reason. It’s Columbus Day, so stocks traded but the bond market was closed. My credit reading came in at 315 basis points, exactly the same as Friday, and my tracker counted that as the end of a widening streak. It isn’t. A number that repeats on a holiday isn’t tightening, it’s just the same number. I’ll fix the tracker so it stops doing that.
Under the surface, nothing has eased. Brent crude is back above $106. Long-term yields are still near their highs, with the 30-year around 5.6%. The Fed’s September minutes said most officials expect another hike by year-end. September’s manufacturing index slipped only a tenth, to 54.5, so growth isn’t the problem.
Stocks are within a fraction of a percent of their record. Credit is calm, the VIX is about 15, and the flags that are lit are the ones about rates and oil.
I’m watching the 30-year yield and credit spreads this week, with inflation data and the start of earnings season both ahead.
October 12, 2026