Bond Market Sends Warning Shot to Kevin Warsh Over Rate Hikes

The Federal Reserve's chairman, Kevin Warsh, may have just received a warning from the bond market.

Yields on longer-term U.S. Treasurys held near their highest levels in 19 years Thursday, a day after Warsh failed to persuade investors that he was willing to support rate increases to fight inflation.

This move was unusual and alarming, with yields on long-term bonds surging while those on short-term Treasurys fell. This indicates concerns that the Fed would wait too long to lift rates, leading to a potentially damaging increase in borrowing costs down the road.

Investors were disappointed with Warsh's comments Wednesday, which seemed to suggest that rate increases might not be necessary because bond yields had already climbed in recent months.