Markets Pare Fed Rate Hike Bets After Warsh's Hawkish
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- Kevin Warsh, new Federal Reserve Chairman, presided over a surprisingly hawkish policy turn last week that shocked investors and sent already-reeling crypto markets tumbling further.
- Markets initially priced in the certainty of not just one but multiple central bank rate hikes this year after digesting the Fed's revised economic forecasts and Warsh's post-meeting press conference.
- The two-year Treasury yield — a key Fed-policy barometer — has dropped to 4.07% from a post-meeting peak of 4.23%, signaling rapid market reassessment.
- The 10-year Treasury yield now sits at 4.36%, actually five basis points below its pre-meeting level, according to the source.
- CME FedWatch now prices a 77% probability of one or more Fed rate hikes by year-end, down from roughly 90% in the immediate aftermath of last week's meeting.
- Crypto markets could find a positive catalyst if expectations of tighter monetary policy continue to diminish, per the source.
Why it matters: Risk-asset investors who fled after Warsh's hawkish debut now have a potential tailwind: the two-year Treasury yield has dropped 16 basis points from its post-meeting spike and CME rate-hike odds have quietly slid from ~90% to 77%. If that unwinding continues, Bitcoin and other rate-sensitive assets could recover ground lost during the initial crypto sell-off triggered by the Fed's surprise.
