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Treasury yields drift higher after Fed Chair Warsh comments

10-year Treasury yields rose about 4 basis points after the Fed decision, as investors focused on uncertainty around Warsh's strategy to curb inflation.

Reported · Written up by our desk · Economy

Treasury yields edged higher again after the Federal Open Market Committee kept interest rates flat for a fifth straight meeting, but comments from new Fed Chair Kevin Warsh added to investor concern about how the central bank plans to tackle inflation. According to Bisnow, markets also digested Warsh remarks during a press conference that some viewed as a “dove in hawk’s clothing.”

Data cited by Bisnow show the 10-year Treasury note yield increased by about 4 basis points between the Fed’s release of its decision and the close of trading on Wednesday. The yield also hovered near 4.75% on Friday, a level investors had associated with stress in some commercial real estate debt tied to the era of ultra-low rates.

Bisnow reported that Evercore ISI’s Krishna Guha said the bond market response appeared less tied to the July decision itself and more linked to uncertainty over the strategy Warsh intends to follow to achieve price stability. The outlet also said former St. Louis Fed President James Bullard criticized Warsh for discussing the inflation target without signaling readiness to take action.

In addition, Bisnow cited J.P. Morgan Chief Economist Michael Feroli, who suggested Warsh’s task forces could be seen as a way to redefine the inflation challenge, adding urgency around delivering lower inflation. The outlet also noted Warsh discussed reviewing how the Fed tracks the economy and the possibility of reducing the frequency of future FOMC meetings.

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