Treasury Market Ushers in Warsh Era With Bets on 2026 Rate Hike

Treasury Market Ushers in Warsh Era With Bets on 2026 Rate Hike 1 / 2 Treasury Market Ushers in Warsh Era With Bets on 2026 Rate Hike Ye Xie Mon, May 25, 2026 at 2:00 AM GMT+7 3 min read (Bloomberg) -- As Kevin Warsh takes the helm at the Federal Reserve, bond investors are betting he’ll prioritize the central bank’s inflation-fighting credibility over President Donald Trump’s push for lower interest rates. Nvidia CEO Urges Super Micro to Tighten Up on Compliance Trump Says He’ll Announce Negotiated Deal With Iran Shortly Iran, US Signal Progress in Peace Talks as Issues Unresolved Rubio Sees Good News Coming on Hormuz as Iran Talks Continue Trump to Force Foreigners Seeking Green Cards to Go Home First With the Iran war unleashing the biggest inflation surge since 2023, traders are pricing in that the Fed is virtually certain to start raising rates by December. That’s a sharp reversal from just three months ago, when markets were betting there were deeper cuts ahead. The shift reflects the impact of turmoil in the Middle East, the resilient US economy and an AI-investment boom pushing the stock market higher, all of which have fueled concerns that inflation could remain stuck above the Fed’s 2% target for some time. In a volatile trading week, two-year Treasury yields — the most sensitive to Fed policy expectations — climbed to as much as 4.14% Friday, the highest in more than a year and nearly 40 basis points above the top end of the Fed’s benchmark rate range. Thirty-year yields briefly touched 5.2% last week, a level last seen in 2007, before retreating to 5.06%. Warsh assumes leadership as a growing number of Fed officials abandon their easing bias. Governor Christopher Waller — a Trump appointee who earlier this year advocated for rate cuts to protect the labor market — said Friday that the Fed’s next move is now just as likely to be a hike. A slew of policymakers, including Vice Chair Philip Jefferson and New York Fed President John Williams, are scheduled to speak this week. As Warsh was sworn into office Friday, Trump, who has repeatedly pressured the Fed to lower borrowing costs, said he wants Warsh to lead the central bank independently. Some investors, including Chitrang Purani, a portfolio manager at Capital Group, are turning more bullish on short-term Treasuries as yields rise and rate hikes are priced in. “I do believe that the bar to hiking rates is still reasonably high because this Fed and Warsh may want to be a little bit more patient before taking that next step to fully understand how inflation is translating into labor markets and financial conditions,” Purani said. “I personally don’t believe the Fed’s reaction function to economic data will be materially different under Warsh than it was in the past.” In addition to reading tea leaves of Fed speakers, bond traders will also focus this week on auctions of two-, five- and seven-year Treasury notes for signs of investor demand. May 26: ADP weekly employment change; Chicago Fed national activity index; Philadelphia Fed non-manufacturing activity; FHFA House Price Index; House Price Purchase Index; S&P Cotality CS 20-City Index; Conference Board consumer confidence index; Dallas Fed manufacturing activity May 27: MBA mortgage applications; Richmond Fed manufacturing index and business conditions; Dallas Fed services activity May 28: Personal income and spending; PCE Price Index; initial jobless claims; durable goods orders; GDP annualized QoQ (second read); new home sales; building permits May 29: Advance goods trade balance; retail and wholesale inventories; MNI Chicago PMI May 26: Minneapolis Fed President Neel Kashkari May 27: Dallas Fed President Lorie Logan; Fed Governor Lisa Cook; Fed Vice Chair Philip Jefferson; Chicago Fed President Austan Goolsbee May 28: New York Fed President John Williams; St. Louis Fed President Alberto Musalem; Richmond Fed President Tom Barkin May 29: San Francisco Fed President Mary Daly; Kansas City Fed President Jeff Schmid; Fed Vice Chair for Supervision Michelle Bowman; Philadelphia Fed President Anna Paulson May 26: 6-, 13-, 26-week bills; 2-year notes May 27: 17-week bills; 2-year floating rate notes; 5-year notes Courts Are Swamped With AI-Powered Do-It-Yourself Lawsuits ICE Raids Did Lasting Damage to American Businesses Blame YouTube, Not Just Trump, for the End of Colbert’s Late Show Been Sanctioned by the US Government? There’s a Guy for That

Treasury Market Ushers in Warsh Era With Bets on 2026 Rate Hike

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Treasury Market Ushers in Warsh Era With Bets on 2026 Rate Hike

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