Only the G Fund gained in September as interest rates hit their highest level since 2002. See every TSP fund's results, plus the third quarter.

Why Did Stocks and Bonds Fall Together in September?

The interest rate on the 10-year U.S. Treasury note climbed above 5.3% on the last day of September. That is its highest level since May 2002. That one number explains much of what happened to the Thrift Savings Plan (TSP) last month. The Federal Reserve added to the pressure. On September 16, it raised its benchmark short-term interest rate by a quarter of a percentage point to a range of 3.75% to 4.00%. Fed Chair Kevin Warsh said inflation “is too high and has been for too long.”

The S&P 500, the index on which the C Fund is based, declined 0.4% for the month. Technology companies were the only part of the index to gain ground. Financial companies and utilities each fell 6% or more. Overseas, European stocks posted their first monthly loss in six months as interest rates rose there too.

The G Fund Stood Alone for TSP Returns in September

The G Fund returned 0.40% in September and was the only TSP fund with a gain. Every other fund, including all 11 L Funds, lost ground.

The F Fund is the other fund TSP investors tend to think of as safe. Not this month. It fell 2.59%, its worst month since September 2022.

Among the core stock funds, the S Fund took the hardest hit, with a 3.86% loss. The I Fund dropped 2.30%. The C Fund held up best, slipping just 0.35%.

A rough September is nothing new. Over the past 20 years, the C Fund lost money in eight Septembers. Three of those losses, in 2008, 2011 and 2022, were steeper than 7%. This year’s dip is mild by comparison.

The S Fund’s loss did change the year-to-date picture. At the end of August, the S Fund was ahead of the C Fund for 2026. It now trails, with a gain of 11.62% for the year compared with 12.73% for the C Fund. The I Fund still leads every TSP fund at 16.45%.

Why Would the G Fund Gain While the F Fund Lost?

TSP investors often lump these two funds together as the safe side of the plan. September showed how differently they work.

The F Fund owns bonds that trade in the open market. It tracks the Bloomberg U.S. Aggregate Bond Index, a broad measure of the U.S. bond market. When interest rates rise, the market price of those bonds falls. That is what happened in September.

The G Fund holds special U.S. Treasury securities issued only to the TSP. Their value does not go up and down. Only the interest rate changes, and the principal and interest are guaranteed by the federal government.

That interest rate is reset every month, based on the average rate on a large group of Treasury securities on the last day of the prior month. Because that group includes long-term bonds, which typically pay higher yields, G Fund investors earn a return close to a long-term interest rate without the price swings of owning long-term bonds. Few investors outside the federal government have access to anything like it.

It also means that rising rates help the G Fund over time rather than hurting it. With rates ending September near their highest level in more than two decades, the G Fund’s rate in the months ahead will likely reflect that.

How Did the Third Quarter Turn Out?

September closed out the third quarter of 2026. It was a mixed quarter and a big step down from a very strong spring.

The C Fund led the quarter with a return of 2.29%. The G Fund added 1.20%. The I Fund finished almost exactly flat, down 0.08%.

The S Fund lost 5.73% for the quarter, its weakest showing since the first quarter of 2025. That comes right after a second quarter in which it gained 19.88%. The F Fund fell 3.46%, its worst quarter since the third quarter of 2022.

All L Funds finished the quarter slightly positive, with returns ranging from 0.26% to 0.77%. L Income, the most conservative of them, did best.

Does One Bad Month Change Anything?

The answer depends on where you are in your career.

If you are a newer federal employee, a down month is not a disaster. With decades of contributions ahead, each paycheck now buys fund shares at lower prices than it did in August.

If you are in mid-career, history offers some perspective. In 2022, the C Fund lost 18.13%, and the F Fund lost 12.83%. Stocks and bonds fell together then too. The C Fund gained 26.25% in 2023 and 24.96% in 2024.

No one knows what the next few months hold, but a steep decline has not been the end of the story before.

If you are close to retirement, September carried a different lesson. Bonds did not cushion the drop in stocks this month. Both moved down at once. That is part of why many investors near retirement keep some money in the G Fund.

One pattern repeats across every group. Many investors sell after prices fall and buy back after prices recover. That habit tends to lock in losses and miss part of the rebound.

Roth TSP Assets Top $100 Billion, and a New Tool for Families

Roth TSP assets reached $100.7 billion at the end of August, up from $98 billion in July. Last month, we reported that participants had converted close to $1 billion from traditional to Roth balances through in-plan conversions since that option launched in January.

Total TSP assets grew to $1,169.5 billion in August, from $1,147.3 billion at the end of July. The plan had 7,357,234 accounts with an average balance of $158,957, up from $156,107 a month earlier.

Participants in the Federal Employees Retirement System (FERS), who hold 4,131,443 of those accounts, had an average balance of $236,327. The 215,979 accounts in the Civil Service Retirement System (CSRS) averaged $259,978. Across the nearly 3 million accounts with a Roth balance, the average Roth balance was $34,482.

That asset growth is coming from investment returns, not new money. Through August, withdrawals and loans paid out exceeded contributions and loan repayments by $16.41 billion this year. That follows a net outflow for all of 2025.

On September 1, the TSP also launched the TSP Life Events Hub, a secure online portal for reporting the death of a TSP participant. Those reporting a death can upload a death certificate and other documents online instead of faxing or mailing them. They can check the status of a claim at any time and get updates by text, email, or both.

It is not a pleasant subject, but it may be worth letting a spouse or adult children know about the hub and making sure the beneficiaries listed in your TSP account are current.

September 2026 TSP Returns

Data as of September 30, 2026. | Source: TSPDataCenter.com

The fourth quarter begins with interest rates at levels not seen by many federal employees in more than two decades. FedSmith will report on how the TSP funds handled that in early November. Nothing in this article is financial advice. A professional financial advisor who has thoroughly reviewed your overall financial situation is the best guide before you make any changes.

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