Forex
US Bond Market Reacts Strongly to Warsh's Hawkish Speech
The bond market reacted strongly to Federal Reserve Chairman Kevin Warsh's speech at the annual economic symposium in Jackson Hole, Wyoming. The mountain setting has been the backdrop for major Fed policy announcements in the past.
The two-year Treasury yield jumped to 4.35% from 4.22% just before the speech, indicating investors are pricing a more credible Fed that may hike interest rates soon to control inflation.
Economists at Bank of America led by Aditya Bhave said the positive market reaction highlights that investors place a premium on policy clarity, even when that clarity carries a message implying higher interest rates.