Warsh's Hawkish Comments Send US Markets Reeling

The US Federal Reserve's next move is still up for debate, despite recent hints from Chair Kevin Warsh. On Friday, Warsh made it clear that inflation credibility remains a top priority, while financial conditions are not as restrictive as previously thought.

Warsh's comments were seen as hawkish, and the bond market responded accordingly. However, the question now is whether the economy can continue to grow without pushing inflation further out of control.

The labour market data will play a significant role in determining the Fed's next move. A strong payroll report could push the odds towards another rate hike, while a mediocre number might suggest that the Fed can afford to wait.

But even with strong growth and profits, the long end of the Treasury curve may remain difficult to tame. Heavy supply, fiscal anxiety, and global yields all contribute to the challenges facing the market.