Treasuries Pare Losses From Fed Hike, Dollar Gains: Markets Wrap

(Bloomberg) — Treasuries pared losses and Asian stocks posted modest gains as Federal Reserve Chair Kevin Warsh’s resolve to tackle inflation reassured markets following the central bank’s first interest-rate hike since 2023.

The yield on the rate-sensitive two-year US note fell two basis points to 4.72% after climbing to the highest since 2024 in the prior session following the Fed move. Yields on the benchmark 10-year and the 30-year bonds both dropped by three basis points. Asian bonds reversed earlier losses and tracked Treasuries higher.

Elsewhere, the Bloomberg Asia Dollar Index dropped 0.3%, while a gauge of the US currency held around a one-month high. The moves came after Warsh struck a hawkish tone, saying the rate increase “removed a dose of accommodation.” Money markets priced in about a 50% chance of another Fed hike in October.

MSCI’s Asia Pacific equities gauge was little changed, with benchmarks in Taiwan and Japan edging higher. Equity-index futures for the S&P 500 Index and the Nasdaq 100 Index climbed over 0.5%. Earlier, Wall Street traders drove stocks to the lowest since July on bets the Fed will keep raising rates to combat inflation.

“I see this as a credibility relief trade rather than a Goldilocks one,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore. “Warsh reinforced the Fed’s inflation-fighting credentials, and you can see that in the stronger dollar, while importantly the long end of the Treasury curve did not move disorderly higher.”

Markets are still acknowledging some growth risk from tighter policy, she said. But the relatively contained long-end reaction, resilience in tech and calmer tone across Asian markets suggest “investors are relieved that a more hawkish Fed has not translated into another shock in long-term yields.”

The Federal Open Market Committee voted unanimously to lift the benchmark rate by a quarter percentage point to a range of 3.75% to 4%. The Fed’s so-called dot plot, which shows policymakers’ projections for the path of interest rates, indicated one more increase this year.

Investors are now weighing how quickly the Fed may tighten further as inflation pressures persist. Its projections point to another hike this year, putting upcoming economic data in focus ahead of the October meeting. Attention now turns to policy decisions in the UK on Thursday and Japan on Friday.

“Markets appear to be taking comfort from the fact that the Fed is tightening into an economy that remains relatively resilient, rather than one that is already showing significant signs of deterioration,” said Gerald Gan, chief investment officer at Reed Capital Partners.

In other corners of the market, Brent held its losses from the prior session when it retreated on signs that some recent Middle East supply disruptions are easing.

Brent traded around $105.85 a barrel after falling as much as 5% on Wednesday as Saudi Arabia sought to restore about half the capacity of its East-West pipeline within days after drone strikes forced its closure last week. Also, President Trump said the Iran war will end “very soon.”

Gold rebounded after three days of losses to about $4,310 an ounce.

Back to the Fed, Warsh reinforced the inflation-fighting message he delivered at Jackson Hole last month. Speaking to reporters Wednesday, he said too many categories of goods and services were showing annualized price gains above 3% over six- and 12-month periods.

President Donald Trump said on social media after the decision that US interest rates should be at 1% or lower, though he stopped short of directly criticizing Warsh.

Wednesday’s move may mark the start of a broader tightening cycle, with both policymakers and traders anticipating at least one more increase this year. Attention is now shifting to the timing and pace of further moves.

“History is clear that once the Fed begins raising rates, they do it multiple times,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management. “But the pattern is less clear about whether they will raise rates at consecutive meetings or leave rates unchanged” at some of them.

Some of the main moves in markets:

Stocks

S&P 500 futures rose 0.5% as of 10:47 a.m. Tokyo time Japan’s Topix rose 0.7% Australia’s S&P/ASX 200 rose 0.3% Hong Kong’s Hang Seng fell 1.3% The Shanghai Composite fell 0.2% Euro Stoxx 50 futures rose 0.6% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1458 The Japanese yen was little changed at 156.13 per dollar The offshore yuan was little changed at 6.7128 per dollar The Australian dollar was little changed at $0.7091 Cryptocurrencies

Bitcoin rose 0.4% to $76,431.13 Ether rose 0.9% to $2,430.05 Bonds

The yield on 10-year Treasuries declined three basis points to 4.99% Japan’s 10-year yield was unchanged at 2.990% Australia’s 10-year yield declined five basis points to 5.31% Commodities

West Texas Intermediate crude fell 0.2% to $102.22 a barrel Spot gold rose 1.1% to $4,308.96 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Momoka Yokoyama.

©2026 Bloomberg L.P.