The yield on the 'long' Treasury bond touched its highest level since 2007 during Warsh's press conference
Federal Reserve Chair Kevin Warsh held a news conference on Wednesday, and the yield on the 30-year Treasury bond touched its highest intraday level since 2007.
The yield on the 30-year Treasury bond spiked higher as Federal Reserve Chair Kevin Warsh's Wednesday press conference progressed, a sign the market is worried that the central bank isn't prepared to lower inflation with interest-rate hikes.
"I think the best way to put it is that the market is calling his bluff on inflation," said Steve Sosnick, chief strategist at Interactive Brokers. "It was already on precarious footing to begin with" ahead of Warsh's press conference, he said. "But it was clear once the bond traders got to work that the stock market was destined to follow."
Warsh's first press conference as Fed chief, in June, was an effort by him to establish credibility and come across as an inflation fighter, said Stephanie Roth, chief economist at Wolfe Research.
After the central bank's meeting Wednesday, "markets are just not buying it," Roth said in an interview on Bloomberg.
Fed officials voted 9-3 to hold rates steady.
Warsh didn't say much because he didn't want to make it clear he was in favor of staying on hold, Roth said.
That might have worked in June, but not now, she added.
Andrew Hollenhorst, U.S. chief economist at Citi, said Warsh signaled his support for low interest rates when he suggested he is watching a "broader range" of inflation metrics than the personal consumption expenditures price index, which has been the Fed's preferred gauge.
The core PCE rate surged to 3.4% in June, leading three voting members of the Fed, and perhaps some nonvoters, to be impatient for rate hikes.
The 2-year Treasury yield BX:TMUBMUSD02Y eased back slightly Wednesday to about 4.26%, but the yield on the "long" 30-year Treasury bond BX:TMUBMUSD30Y surged 13 basis points to about 5.22%. It also touched its highest intraday level since 2007 on Wednesday.
Cindy Beaulieu, chief investment officer at Conning North America, said it now appears that the Fed might wait to hike rates until year-end.
Yet borrowing costs already have been pushing higher for the small group of major tech companies footing the bill for the artificial-intelligence buildout, as MarketWatch has reported. Of that group, Meta $(META)$ and Microsoft $(MSFT)$ reported earnings after the closing bell Wednesday.
While people talk about those costs being no big deal for these companies, "at some point, it probably hits a point of friction," Beaulieu said.
The Dow Jones Industrial Average DJIA plunged 1,153 points, or 2.2%, to 51,594 on Wednesday, booking its biggest daily decline since April 2025, according to Dow Jones Market Data. The S&P 500 SPX and Nasdaq Composite Index COMP also booked sharp losses.
-Greg Robb -Joy Wiltermuth
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