U.S. business activity accelerated sharply in September, sending Treasury yields higher and prompting traders to increase bets on another Federal Reserve rate hike in October. The flash S&P Global U.S. Composite PMI Output Index rose to 58.4 from 56.0 in August, its strongest reading since July 2021. The survey points to faster expansion across both services and manufacturing while also showing renewed inflation pressure.
According to S&P Global’s September flash PMI report, business activity accelerated for a fourth consecutive month. S&P Global said the September data signaled the fastest U.S. private-sector growth in more than five years, with its survey indicators pointing to roughly 4% annualized economic growth during the third quarter and an even stronger pace during September itself.
Growth and Inflation Push Treasury Yields Higher
Services remained the primary engine of expansion, but manufacturing strengthened substantially. Factory output growth reached its fastest pace since April 2022, while Reuters reported that manufacturing hiring accelerated at the fastest rate since February 2021. The expansion was accompanied by increasingly stretched capacity, longer supplier delivery times and rapidly growing order backlogs.
Employment strengthened across the broader private sector as companies responded to rising demand. S&P Global said overall payroll growth reached its fastest rate since June 2022. At the same time, input costs increased at their strongest pace in nearly four years, partly because of higher fuel and transportation expenses. The combination of faster output, stronger hiring and rising costs produced what S&P Global characterized as a distinctly hawkish signal for monetary policy.
Bond markets reacted immediately. The benchmark 10-year U.S. Treasury yield climbed to approximately 5.05% on September 23, its highest level since 2007, while the two-year yield moved to its highest point since June 2024. Fed-funds futures shifted to imply roughly a 73% probability of another rate increase at the October meeting, up from about 53% earlier in the session. Those probabilities reflect market pricing and can change rapidly as economic data and Federal Reserve communications evolve.
The move extended an already significant rise in borrowing costs. By September 24, the 10-year yield had traded around 5.14%, while the 30-year reached approximately 5.46%, its highest level since 2004. The latest selloff reflects more than monetary-policy expectations alone, with investors also weighing resilient growth, energy-driven inflation pressure and heavy government borrowing.
Strong Data Complicates the Fed Outlook
Treasury Secretary Scott Bessent highlighted the economic strength in remarks shared through the U.S. Treasury’s official account, describing the PMI numbers as the strongest since 2021. He also cited more than one million private-sector jobs created since January 2025 and real wage growth. Those comments represent the administration’s interpretation of the economic backdrop, while the PMI itself independently confirms a sharp acceleration in surveyed business activity.
.@SecScottBessent: “We saw the PMI numbers today—the strongest since 2021. We have seen over a million private-sector jobs created. We are seeing real wage growth. Unlike under the Biden administration, where we had negative wage growth, we are seeing substantial wage growth…
— Anna E Law (@AnnaELaw236281) September 23, 2026
The macro environment has become increasingly relevant to digital assets as well. ChainReport recently tracked Bitcoin sentiment cooling while the cryptocurrency remained above $86,000, only days after U.S. spot Bitcoin ETFs recorded their largest inflow of 2026. Higher risk-free yields can compete with risk assets for capital, but the relationship is not mechanical and does not determine crypto prices on its own.
Earlier episodes have shown the same cross-asset sensitivity. During renewed geopolitical stress in April, Bitcoin weakened as Treasury yields and oil prices climbed, while another period of conflict produced sharp Bitcoin swings alongside changing futures positioning and macro conditions. Those episodes provide context for why crypto desks monitor bond yields closely even when the catalyst originates in traditional economic data.
The September PMI does not guarantee that official GDP or employment data will match the survey’s implied strength, because PMI readings measure responses from participating businesses rather than comprehensive economic output. The next concrete milestone is the Federal Reserve’s October 27–28 meeting, where policymakers will evaluate whether strong growth and persistent inflation warrant another increase after September’s rate hike. Until then, Treasury yields, inflation data and incoming labor-market releases will determine whether the market’s elevated probability of additional tightening persists.