Warsh Remarks Spark Rate Hike Fears, Gold Selloff, and Oil Spike

Kevin Warsh's remarks at the Jackson Hole symposium led to a sharp repricing of front-end Treasury rates, without an equivalent move at the long end. The 2-year Treasury yield jumped 11 basis points to 4.34%, its biggest one-day rise since March. This pushed implied odds of a September rate hike to 61% from 31% previously.

The market's reaction was driven by Warsh's statement that financial conditions were not restrictive, rather than concerns about fiscal credibility. As a result, equity markets remained relatively muted, with the Dow falling 9 points and the S&P 500 slipping 20 points to 7,711.

In contrast, gold sold off as yields rose and the dollar strengthened, plummeting over 3% or nearly $150 from around $4,630 to $4,455. Oil prices, however, surged after US strikes hit Iranian rocket launchers, with crude rising 3.4% to $86.30.