Bond market signals Fed rate hike as Warsh takes chair
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- Bond market investors see the 2‑year Treasury yield above the federal funds rate, indicating they think the Fed’s current rate is too low to curb inflation, which rose 3.8% YoY in CPI and 6% YoY in wholesale prices.
- Fed funds futures traders are pricing in no rate cuts for the rest of the year and a higher probability of a Fed rate hike, according to CMEGroup’s FedWatch tool.
- Kevin Warsh was confirmed by the Senate as Fed Chair, pledged a "regime change," and says the Fed should stay quiet on policy, according to the Financial Times.
- Fed Governor Miran resigned and publicly backed Warsh’s appointment, as reported by CNBC.
- Donald Trump continues to pressure the Fed for lower rates, arguing that cheaper borrowing would benefit the economy.
Why it matters: Investors in Treasury securities will see higher yields as the 2‑year Treasury trades above the Fed’s funds rate, while borrowers face steeper loan costs; the Fed’s likely hike also tightens credit market liquidity.
