US Treasury yields climbed on Wednesday as investors digested the hawkish policy outlook of incoming Federal Reserve Chair Kevin Warsh, who signaled that persistent inflation and a resilient labor market leave little room for immediate rate cuts.
The repricing follows Warsh’s recent public comments suggesting that the central bank’s projections could even point toward a rate increase later this year, a stark departure from the easing cycle currently anticipated by many market participants.
The 10-year Treasury yield extended its gains, reflecting a broader unwinding of rate-cut expectations.
Short-end rates, particularly the 2-year yield, also moved higher as traders adjusted their Fed funds futures pricing to accommodate a tighter monetary policy stance.
The yield curve steepened slightly as the market absorbed the implication that the Fed’s next move may be a hike rather than a cut.
Warsh’s arrival marks a significant shift in tone for the central bank.