Lofty Bond Yields, Bessent's Intervention Pose Challenge to Fed's Warsh
The Treasury will double buybacks to $4 billion as long-term yields approach 5%, easing a sell-off before Kevin Warsh speaks.
- Central bankers and policymakers gather in Jackson Hole, Wyoming, on Thursday for the Federal Reserve Bank of Kansas City's annual economic policy symposium, with investors closely monitoring Federal Reserve Chairman Kevin Warsh's keynote address on Friday for clues on policy direction.
- Treasury Secretary Scott Bessent recently announced plans to at least double bond buybacks to $4 billion from $2 billion, aiming to support liquidity and tamp down long-term yields that surged to a 19-year high amid inflation and fiscal deficit concerns.
- Billionaire investor Stanley Druckenmiller blasted the policy, writing that "every basis point of artificial yield suppression is a subsidy to procrastination," while EY-Parthenon chief economist Gregory Daco warned of "fiscal dominance" where the Fed takes instruction from the Treasury.
- Market participants are urging Warsh to be more forthcoming about Fed strategy, as his ambiguous communication has stoked uncertainty over how the central bank plans to reach its 2% inflation target while core inflation remains at 3.3%.
- With core inflation at 3.3%, rate futures price a 40% chance of a September rate hike, and analysts expect Warsh's Jackson Hole speech to clarify whether higher bond yields are doing the Fed's tightening work or whether policy action remains necessary.
15 Articles
15 Articles
The financial markets are waiting closely for the speech that Federal Reserve President Kevin Warsh will be supporting at the Jackson Hole Annual Meeting on Friday. Bank of America considers the event a major risk to the dollar and bond market, following the recent intervention of the US Treasury, CNBC broadcasts.
Lofty bond yields, Bessent's intervention pose challenge to Fed's Warsh
Warsh will deliver the opening address at the annual central bankers conference in Jackson Hole, Wyoming, on Friday, and will be expected to address recent Treasury interventions in the bond market. The new Fed chair has faced criticism over sending sometimes confusing signals at press conferences in his tenure so far, including on how he sees bond yields. In June, Warsh said he was comfortable with lower bond yields, but six weeks later said hi…
Kevin Warsh arrives in Jackson Hole in a curious situation. The president of the Federal Reserve (Fed) wants to reduce the dependence of the markets on the central bank's orientation and give more room for the prices of assets to reflect economic conditions. At the same time, the American Treasury is increasing the purchases of long bonds precisely because the yields of this part of the curve have become too high for Washington's comfort. Exclus…
Warsh faces yields, a Treasury rescue and inflation at Jackson Hole
Federal Reserve Chair Kevin Warsh delivers his first Jackson Hole address on Friday with long-term borrowing costs elevated, inflation above target and the US Treasury already intervening in bond markets to do what monetary policy has not.
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