Two-Year Yield Jumps on Warsh’s Inflation Pledge: Markets Wrap
(Bloomberg) — Wall Street traders sent short-term yields sharply higher as Federal Reserve Chair Kevin Warsh vowed to bring inflation to the target, boosting bets on a rate hike and stabilizing longer-dated bonds.
In his first major speech since taking the helm of the central bank, Warsh appeased investors urging a strong determination in dealing with price pressures after a recent bout of Treasury volatility. Two-year yields climbed 12 basis points to 4.35%. Those on 30-year securities barely budged. The dollar rose. Gold fell. The S&P 500 erased an earlier gain as chipmakers dropped.
“Here is my standard: We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do. That’s our job,” Warsh said at the Fed’s annual conference in Jackson Hole, Wyoming.
He added that financial conditions are not currently restrictive and rates are the Fed’s “predominant tool” for achieving its mandate, but stopped short of signaling support for a hike when officials gather in September.
“I would say Warsh was successful in reestablishing confidence,” said Larry Holzenthaler at Catalyst Funds. “He came across as very focused on inflation and bringing it back in line with the Fed’s 2% target. The market seems to be reacting exactly the way the Fed wants.”
“I believe he did a very good job of laying out a pathway, a framework, a playbook and the rules of his road on what he’s watching out for and what will guide him in terms of properly calibrating monetary policy as best he can,” said Peter Boockvar, author of The Boock Report.
Warsh’s speech delivered a far clearer – and hawkish – message than his last press conference, according to Capital Economics. Hikes are not guaranteed, but the Fed chief is now suggesting he’s on board with them if economic growth remains strong and inflation stays a bit too firm, it added.
“Although we expect incoming data to improve, the risk of a September hike has increased,” said Seema Shah at Principal Asset Management. “The positive market reaction highlights that investors place a premium on policy clarity, even when that clarity carries a more hawkish message.”
After Warsh’s remarks, traders increased bets on higher rates, with money markets projecting a more than 50% chance of a hike at the Sept. 16 meeting. At least one such move by the end of the year is seen as virtually assured.
“Warsh’s comments boosted rate-hike odds and terminal-rate pricing, though markets may have overreacted given the Fed’s September decision remains highly dependent on upcoming payrolls and inflation data,” said Oscar Munoz at TD Securities.
Corporate Highlights:
A consortium of buyout firm Advent and payment processor Stripe has decided to abandon its pursuit of fintech pioneer PayPal Holdings Inc., a potential deal that would have ranked as one of the biggest-ever leveraged buyouts, according to people familiar with the matter. Gap Inc. named a retail industry veteran to head Old Navy while profit outpaced estimates, offsetting a sales decline at the value chain and lower sales guidance. Rivian Automotive Inc. announced that Chief Financial Officer Claire McDonough would step down from the electric-vehicle manufacturer in the coming months to take the same role at turbine maker GE Vernova Inc. Eli Lilly & Co.’s blockbuster diabetes drug Mounjaro won US approval to reduce the risk of serious cardiovascular problems, broadening the medicine’s reach beyond controlling blood sugar and strengthening its position in the increasingly competitive market for GLP-1 drugs. BioNTech SE and Roche Holding AG abandoned a trial of a personalized cancer vaccine, dashing hopes that had been raised by a rival drugmaker’s recent success in the field. Some of the main moves in markets:
Stocks
The S&P 500 fell 0.25% as of 4 p.m. New York time The Nasdaq 100 fell 0.7% The Dow Jones Industrial Average was little changed The MSCI World Index fell 0.2% Currencies
The Bloomberg Dollar Spot Index rose 0.4% The euro fell 0.6% to $1.1585 The British pound fell 0.4% to $1.3537 The Japanese yen fell 0.4% to 160.09 per dollar Cryptocurrencies
Bitcoin fell 3.2% to $77,505.37 Ether fell 3% to $2,431.68 Bonds
The yield on 10-year Treasuries advanced five basis points to 4.72% Germany’s 10-year yield advanced three basis points to 3.28% Britain’s 10-year yield advanced three basis points to 5.06% Commodities
West Texas Intermediate crude fell 0.1% to $83.42 a barrel Spot gold fell 3% to $4,460.88 an ounce ©2026 Bloomberg L.P.
