US PMI Preview: Will Strong Business Activity Push the 10-Year Treasury Yield Back Above 5%?

Key Takeaways

• The preliminary US September manufacturing, services and composite PMIs will be released on September 23 at 9:45 a.m. ET.
• Economists expect the manufacturing PMI to ease from 53.9 to 53.4 and the services PMI to decline from 56.5 to 56.0, leaving both sectors firmly in expansion.
• Strong activity, employment and price data could push the 10-year Treasury yield back above 5%, while a sharper slowdown may support technology stocks and gold.

The September US Purchasing Managers’ Index report could determine whether the 10-year Treasury yield makes another sustained move above 5% as investors assess the likelihood of additional Federal Reserve rate hikes.

The benchmark yield ended last week at 4.995%, just below the psychologically important 5% threshold, after briefly trading above that level earlier in the week. The move followed the Federal Reserve’s first interest-rate increase since 2023 and reflected growing concerns about persistent inflation, elevated energy prices and resilient economic growth.

Wednesday’s PMI report will provide one of the earliest readings of US business conditions following the Fed’s decision. A strong result could reinforce expectations that the economy can absorb higher borrowing costs, giving policymakers additional room to tighten monetary policy.

When Will the September US PMI Report Be Released?

S&P Global will release its preliminary September PMI figures on Wednesday, September 23, at 9:45 a.m. Eastern Time.

The report will include separate readings for manufacturing and services, as well as a composite index combining activity across both sectors. A reading above 50 indicates expansion, while a figure below 50 signals contraction.

Current market expectations are:

The forecasts point to a modest loss of momentum rather than a meaningful deterioration. Both manufacturing and services are expected to remain comfortably above the 50-point expansion threshold.

The manufacturing and services expectations are listed in the latest US Manufacturing PMI calendar and US Services PMI calendar.

August PMI Showed the Strongest Growth in More Than Four Years

The US composite PMI rose to 56.0 in August from 54.5 in July, marking the strongest expansion in private-sector activity in 52 months.

Services drove most of the acceleration. The final services PMI reached 56.5, up from 54.6, as new business increased and companies hired additional workers. Manufacturing also remained in expansion, although the factory index was unchanged at 53.9 after its preliminary reading had suggested a slowdown.

Six of the seven sectors monitored by S&P Global expanded during August. Financial services, consumer services and technology recorded particularly strong activity. New orders grew at their fastest pace in 20 months, while employment increased at its strongest rate in 19 months.

Price data offered some relief. Input-cost inflation eased to its lowest level since April 2025, while selling-price inflation slowed to a nine-month low. Nevertheless, costs remained elevated, particularly for energy, transportation and imported materials.

The combination of stronger output and softer price pressures initially appeared favorable for markets. However, subsequent inflation data and higher oil prices led investors to focus more heavily on the possibility that demand remained too strong for inflation to return quickly to the Federal Reserve’s 2% target. S&P Global’s August composite PMI data showed that private-sector growth accelerated for a third consecutive month.

Recent Economic Data Point to Continued Resilience

The PMI report follows several indicators showing that the US economy remains relatively strong despite higher borrowing costs.

Retail sales increased 1.2% in August, exceeding the 0.7% rise expected by economists. Sales excluding gasoline stations still climbed 1.1%, suggesting that the increase was not solely caused by higher fuel prices. The retail-sales control group, which contributes to GDP calculations, advanced 1.4%. The August retail sales report highlighted continued consumer demand across online retail, restaurants and electronics.

The manufacturing picture has been less consistent. US industrial production was unchanged in August, missing forecasts for a 0.3% increase, while factory output declined 0.3%. Durable-goods production also weakened.

This divergence makes the September PMI particularly important. Another strong services reading would suggest consumer and business demand remains robust enough to offset slower factory production. A manufacturing decline combined with weaker services activity would instead raise questions about whether higher interest rates are beginning to restrain the broader economy.

The Federal Reserve Has Returned to Rate Hikes

The Federal Reserve raised the federal funds target range by 25 basis points to 3.75%–4.00% on September 16. It was the central bank’s first rate increase in more than three years.

The decision was unanimous. In its official statement, the Federal Open Market Committee said economic activity was expanding at a solid pace, domestic spending remained resilient and capital investment was robust. It also described inflation as elevated and said the increase would support a return to the 2% target. The Federal Reserve’s September statement did not commit to another immediate increase.

Updated projections nevertheless suggested that most officials expect policy to remain tight. The median forecast placed the federal funds rate near 4.1% at the end of 2026, consistent with approximately one additional quarter-point increase from the current midpoint.

A strong PMI report would support that outlook. In particular, investors will examine whether companies are still increasing employment and passing higher costs on to customers. Accelerating selling-price inflation would be more consequential for monetary policy than a strong headline activity reading alone.

Why Is the 10-Year Treasury Yield Near 5%?

The 10-year Treasury yield briefly climbed above 5% before the Fed meeting and reached approximately 5.04%, its highest level since 2007.

Several forces have contributed to the increase:

• Strong economic activity has reduced expectations of an imminent slowdown.
• Persistent inflation has revived expectations of additional Fed tightening.
• Higher oil prices have increased concerns about a new inflationary shock.
• Large government deficits and heavy Treasury issuance have increased the supply of long-term debt.
• AI-related data-center investment is creating substantial competition for capital.

The yield fell to approximately 4.93% immediately after the Fed decision before recovering to 4.995% by the end of last week. That rebound indicates that investors remain reluctant to buy long-dated bonds aggressively while inflation, fiscal borrowing and economic growth remain elevated.

The 5% level matters because Treasury yields influence borrowing costs and valuations throughout the financial system. Higher long-term yields raise mortgage and corporate financing rates while reducing the relative appeal of equities. The Wall Street Journal noted that the recent rise reflects a combination of persistent demand, fiscal deficits and inflationary supply shocks.

How Could the PMI Report Affect Treasury Yields?

A stronger-than-expected report would likely produce the most significant market reaction if it also showed rising prices and employment.

If the manufacturing PMI remains close to 54 and services activity exceeds 56, investors may conclude that the September rate increase has not meaningfully weakened demand. The 10-year yield could retest the recent 5.04% high, while the two-year yield may rise as traders increase expectations for another Fed move.

An approximately in-line report would confirm continued expansion without necessarily changing the monetary-policy outlook. Under that scenario, the 10-year yield could continue consolidating around 4.95% to 5.00%.

A sharper slowdown would have the opposite effect. Manufacturing below 52 or services activity falling toward 53 could reduce rate-hike expectations and push the 10-year yield back toward the post-Fed area around 4.90% to 4.93%.

The main scenarios are:

What Could the PMI Data Mean for Stocks, Gold and the Dollar?

Technology and other growth stocks are particularly sensitive to long-term yields. A move above 5% increases the discount rate applied to future earnings, potentially pressuring highly valued AI, semiconductor and software companies.

Financial stocks may initially benefit from higher yields, although an increasingly flat yield curve can limit banks’ lending margins. Housing, utilities and real estate companies would remain vulnerable because their financing costs are closely connected to longer-term rates.

Gold could face renewed selling if strong PMI data lift both Treasury yields and the US dollar. Bullion does not generate interest income, making it less attractive when real yields rise. Conversely, weaker activity and softer price components could push yields lower and help gold recover.

The dollar would likely respond most directly to changes in short-term rate expectations. A PMI beat could strengthen the greenback, particularly against the euro and other currencies backed by central banks facing weaker growth.

Will the 10-Year Treasury Yield Stay Above 5%?

The headline PMI readings alone may not decide whether the 10-year yield remains above 5%. Investors will pay equal attention to the survey’s price, employment and new-order components.

Strong output accompanied by easing price pressures could be interpreted as a constructive expansion and produce only a limited rise in yields. Strong growth combined with accelerating prices would present a much more hawkish signal.

For now, the 5% threshold remains the key dividing line. A decisive move above the recent 5.04% high would suggest that bond investors expect persistent inflation and higher long-term borrowing costs. Failure to hold 5%, particularly after strong PMI figures, could indicate that much of the hawkish Fed outlook is already reflected in bond prices.

The September PMI report will therefore test whether the US economy is merely resilient or still running strongly enough to require another round of monetary tightening.