Warsh's Hawkish Message Sends Yields Soaring

Federal Reserve Chair Kevin Warsh's speech at Jackson Hole, Wyoming has sent shockwaves through Wall Street, as he vowed to bring inflation down to target. This move has boosted bets on a rate hike and stabilized longer-dated bonds.

In his first major speech since taking the helm of the central bank, Warsh promised investors that he would be firm in dealing with price pressures. He stated, 'Here is my standard: We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do. That's our job.'

Warsh also emphasized the importance of financial conditions being not currently restrictive, but stopped short of signaling support for a hike when officials gather in September.

The market reacted positively to Warsh's speech, with two-year yields climbing 11 basis points to 4.34%. Meanwhile, the dollar rose and gold fell.