US Treasury yields, particularly for longer-dated bonds, have edged higher as markets await Federal Reserve Chair Kevin Warsh's speech at the annual Jackson Hole Symposium. The 30-year Treasury yield rose to 5.21% on Friday, after briefly topping 5.3% last week, its highest level since 2007. The benchmark 10-year U.S. Treasury yield was up 2 basis points at 4.69%. This increase in yields reflects investor caution and a desire for clear guidance from Warsh on the Fed's approach to persistent inflation and the country's growing fiscal challenges.
Warsh's first few months as chair have been challenging, with longer-dated Treasury yields rising since the Fed's July meeting. This rise has been attributed by some investors to a lack of concrete measures to tackle stubborn inflation. The market is currently pricing in about a one-in-three chance of a Fed rate increase at its September 16 meeting, and fully anticipates a hike by December. Analysts like Torsten Slok, chief economist at Apollo Global Management, suggest Warsh's speech could have a hawkish tone.
The rising yields are occurring against a backdrop of elevated US national debt, which has surpassed $40 trillion, pushing up borrowing costs across the economy. To counteract this, Treasury Secretary Scott Bessent announced plans to at least double buybacks of 10- to 30-year bonds, from $2 billion to $4 billion per operation, though the market's response has been mixed. Critics, including billionaire investor Stanley Druckenmiller, have labeled Bessent's strategy as "price management." The divergence in approach between Bessent, who is intervening to suppress long-term yields, and Warsh, who appears content to let market forces dictate tightening, creates unusual tension in the market.
