Warsh’s arrival leaves long bonds without a safety net
The bond market is experiencing significant changes as central bank intervention is removed, leading to rising long-term borrowing costs. Kevin Warsh's appointment as the new Federal Reserve chair raises concerns about the future of bond-buying policies, as he opposes such measures. This shift leaves the long end of the market without the safety net it has relied on for nearly two decades.
- ▪U.S. long-bond borrowing rates have surged due to the Iran war, inflation, and speculation about interest-rate hikes.
- ▪Thirty-year Treasury yields have exceeded 5.15 percent for the first time since before the Global Financial Crisis in 2007.
- ▪Kevin Warsh, the new Federal Reserve chair, is a critic of Fed bond-buying and aims to reduce the central bank's balance sheet.
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ShareSave for laterPlease log in to bookmark this story.Log InCreate Free AccountInvestors may now be discovering what long-term government borrowing costs are really like when you remove the potential backstop of central bank intervention from the bond market.The main driver of surging U.S. long-bond borrowing rates this year is clear enough: the Iran war, the related oil shock, racing inflation and the inevitable speculation about interest-rate rises.Thirty-year Treasury yields have risen more than 50 basis points since the war began, topping 5.15 per cent for the first time since before the Global Financial Crisis in 2007.But that milestone also reflects another factor that’s aggravating the sudden repricing of the debt market.
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