5 days ago
Treasury Yields Hold Firm Ahead of Warsh’s Jackson Hole Speech
US government bond yields stayed mostly steady while investors waited for Kevin Warsh to speak.
Warsh is the chair of the Federal Reserve.
His speech could explain whether interest rates might rise, fall or stay the same.
One Fed official, Jeffrey Schmid, said rates may not be high enough to slow the economy and inflation.
Recent data showed that inflation was higher than expected and that the US economy continued to grow.
Traders do not expect a rate change in September, but many expect a possible increase by December.
Higher oil prices and concerns about government debt are also making investors nervous.
The speech may give markets more clues about the Fed’s plans.
US Treasury yields were largely flat as investors awaited Federal Reserve Chair Kevin Warsh’s Jackson Hole address.
The 30-year yield was 5.185% on Thursday and 5.21% on Friday, while the 10-year yield reached 4.69% on Friday.
Kansas City Fed President Jeffrey Schmid said current interest rates are not sufficiently restrictive to bring inflation back to 2%.
Traders priced in no September rate change but more than a 70% chance of a rate increase by December.
Higher inflation, resilient growth, elevated oil prices, fiscal concerns and weaker foreign Treasury demand have increased market volatility.
- Who
- Federal Reserve Chair Kevin Warsh, Kansas City Fed President Jeffrey Schmid, investors and other global central-bank officials.
- What
- US Treasury yields remained broadly steady as markets awaited signals about the Federal Reserve’s interest-rate policy.
- Where
- In US Treasury markets and at the Jackson Hole symposium.
- When
- Yields were reported in Thursday and Friday trading, ahead of Warsh’s speech scheduled for Friday at 10 a.m. New York time.
- Why
- Investors want clarity because inflation remains above the Federal Reserve’s 2% target, economic growth is resilient and oil prices are creating additional inflation risks.
Arguments for Higher Rates
Arguments for Caution
How restrictive policy should be
Arguments for Higher Rates
Jeffrey Schmid said current rates are not providing sufficient restraint and suggested that further increases may be needed to return inflation to 2%.
Arguments for Caution
Traders expect borrowing costs to remain unchanged in September, indicating caution about tightening policy immediately.
Inflation and economic conditions
Arguments for Higher Rates
Higher-than-expected inflation, resilient economic growth and elevated oil prices are supporting expectations of another rate increase before year-end.
Arguments for Caution
Warsh has avoided providing forward guidance, and the divided policy committee and uncertain economic outlook make the future rate path unclear.
Treasury debt purchases
Arguments for Higher Rates
The Treasury said it would at least double planned purchases of longer-term government debt, with Treasury Secretary Scott Bessent indicating the program could expand further.
Arguments for Caution
The intervention has drawn criticism, while concerns about US budget deficits, above-target inflation and weaker demand from Japan and China remain.
Key facts
- 30-year Treasury yield
- 5.185% in Thursday trading and 5.21% on Friday; it briefly exceeded 5.3% the previous week.
- 10-year Treasury yield
- 4.69% on Friday, up 2 basis points.
- Two-year Treasury yield
- 4.222% on Thursday and 4.234% on Friday.
- Warsh speech
- Scheduled for Friday at the Jackson Hole symposium, at 10 a.m. New York time.
- US economic growth
- The economy grew at a 1.5% annualized pace in the second quarter.
- Rate outlook
- Traders priced in no September change and more than a 70% chance of a rate increase by December.
- Federal Reserve inflation target
- 2%.
- Treasury purchases
- The US Treasury said it would at least double planned purchases of longer-term government debt.
Sources
Related news
Warsh’s Jackson Hole Speech Tests Fed Independence and Inflation Strategy
Investors Urge Warsh to Prioritize Inflation in Jackson Hole Speech
Warsh’s Jackson Hole Debut Puts Fed Policy to Bond Test
Warsh Hawkish Tone Sends Markets Betting on Fed Rate Hikes
Kevin Warsh’s Jackson Hole Test: Taming Inflation Without Bond Shock
Warsh Signals Possible Rate Hikes as Inflation Stays Above Target
Indian Firms Invest $40 Billion in U.S., Supporting Jobs
Trump Aides Seek Quiet Iran War Before Midterm Elections
Global Bond Sell-Off Pushes Japan Yields To 30-Year High
US and China Hold Quiet Talks Over Iran Conflict
Trump-Xi Talks Expected to Address AI Guardrails
