Bond Yields Soar as Warsh's Credibility Comes Under Fire

The recent decision by US Federal Reserve Chairman Kevin Warsh to keep interest rates unchanged for a seventh consecutive month has sent bond yields soaring to a 19-year high, sparking concerns about his credibility in tackling inflation.

Following the Fed's announcement on Wednesday, investors dumped 30-year Treasury bonds, pushing the yield up as much as 14 basis points to nearly 5.23 percent. This steepening of the yield curve indicates that Warsh's policy strategy lacks credibility, according to Ben Emons, managing director of fixed income at Highline Asset Management LLC and founder of FedWatch Advisors LLC.

Emons noted that being hawkish without taking action is a convenient way for the Fed to let markets judge for themselves, but this could backfire if inflation accelerates and the market judges the Fed as being behind the curve again.