(Bloomberg) — The $31 trillion Treasury market has an unequivocal message for Kevin Warsh’s Federal Reserve: Interest rates aren’t high enough.
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Yields on policy-sensitive US two-year notes have surged to their highest level in more than a year after a trove of economic data led traders to price in at least one quarter-point rate hike as soon as October. At around 4.15%, the two-year yield trades well above the Fed’s current policy band of 3.5% to 3.75%, a divergence that began in March.
The reset upwards only intensified last week after the latest read on job growth topped all forecasts, reinforcing a growing conviction that rates need to rise in order to rein in inflation pressures and temper the risk of an AI-induced boom overheating the economy. Reports due later this week on consumer and wholesale prices in May are expected to provide further validation of the narrative.
Link: https://finance.yahoo.com/economy/policy/articles/treasury-market-telling-kevin-warsh-073000716.html