September 24, 2026 — U.S. economic momentum strengthened further in September, with S&P Global's Flash Composite PMI rising to 58.4, the strongest reading since July 2021. New orders, employment and business activity all pointed to resilient demand, while rising input costs added to concerns that inflation could remain elevated. The combination has reinforced expectations for further Federal Reserve tightening and placed renewed pressure on Treasury yields and broader market liquidity.
U.S. PMI Signals Stronger Growth and Resilient Demand
The September Flash Composite PMI climbed from 56.0 in August to 58.4, marking the fastest expansion in more than five years. Both manufacturing and services activity continued to expand, while employment growth also accelerated. S&P Global noted that the stronger output was accompanied by rising demand and increased capacity pressures, suggesting that the improvement was not driven solely by supply-side normalization.
The stronger activity has important implications for monetary policy. With economic growth remaining resilient, markets are reassessing how much room the Federal Reserve has to pause its tightening cycle. The latest data therefore add to the case for keeping interest rates elevated for longer if demand and inflation remain firm.
Rising Input Costs Add to Inflation Pressure
Inflation signals also strengthened. S&P Global reported that business cost growth accelerated sharply in September, reaching its highest level since October 2022. Higher energy and transportation costs, longer supplier delivery times and capacity constraints contributed to the increase in input prices.
This creates a more complicated inflation backdrop for the Federal Reserve. Instead of inflation pressure coming primarily from temporary supply disruptions, stronger demand and constrained capacity are increasingly contributing to price pressures at the same time.
Federal Reserve Governor Michael Barr said further policy adjustments may be needed to bring inflation back to the central bank's 2% target in a timely manner. Following his comments and the stronger PMI data, fed funds futures moved to price roughly a 73% probability of an October rate hike, up from about 53% earlier.
Treasury Yields Reprice the Path of Fed Policy
The Treasury market reacted sharply to the stronger economic and inflation signals. The 10-year Treasury yield moved above 5% and reached around 5.13% intraday, its highest level since 2007, while the five-year Treasury auction also showed weaker demand.
The move suggests that markets are reassessing more than just the timing of the next rate hike. Higher yields also reflect questions about how high policy rates may need to remain and how long restrictive financial conditions could persist.
Longer-term yields are influenced by factors beyond the federal funds rate, including inflation expectations, Treasury issuance and investor demand. As a result, even additional Treasury buybacks or short-term liquidity measures may not fully offset the forces keeping longer-term yields elevated. S&P Global has similarly highlighted persistent upward pressure on long-term U.S. rates and noted that Treasury buybacks have so far done little to reverse that trend.
What Higher Rates Mean for Crypto Market Liquidity
For crypto markets, the impact of higher Treasury yields may be more nuanced than a simple risk-off reaction. Elevated yields can increase the opportunity cost of holding risk assets and tighten broader financial conditions, while strong earnings and capital spending in large technology companies can continue to support parts of the broader risk-asset complex.
The September market reaction illustrates this tension. U.S. equities came under pressure as Treasury yields rose, while technology stocks also faced valuation pressure from higher rates. At the same time, strong AI-related investment remains an important source of demand in the broader market.
For crypto traders, the key variables to monitor are therefore the direction of U.S. Treasury yields, expectations for additional Fed rate hikes, the U.S. dollar and changes in overall market liquidity. If stronger economic data continue to push rate expectations higher, liquidity conditions could remain an important factor for Bitcoin and other major crypto assets.
Markets Focus on Growth, Inflation and the Fed's Next Move
The latest PMI data have shifted the market discussion toward a more persistent question: can strong U.S. growth coexist with elevated interest rates without keeping inflation pressures high?
With the September PMI reaching its highest level since July 2021 and business cost pressures accelerating, markets are increasingly focused on the possibility that monetary policy may need to remain restrictive for longer.
For crypto and other risk assets, the path of Treasury yields and Federal Reserve expectations will remain important indicators of liquidity conditions. Traders will be watching upcoming inflation, employment and policy signals to assess whether the current repricing of the rate path continues or begins to moderate.
