The yield on the 30-year US Treasury bond climbed above 5.2%, its highest level since 2007, reflecting mounting concerns about longer-term inflation. At its July meeting, the Federal Reserve left interest rates unchanged, in line with consensus expectations, even though rate futures indicated that roughly one-third of the market had been positioned for a hike.
The 30-year bond led the move across the US Treasury curve following controversial remarks by Fed Chair Warsh at the post-meeting press conference. His reluctance to present a rate hike as the Fed’s preferred response to inflation pressures drove a sharp increase in long-dated yields, even as yields on shorter maturities declined.
Warsh also welcomed the rise in long-term yields seen in the second quarter, describing it as effectively functioning as a policy tool. This stood in contrast to his comments at the ECB’s central banking forum just a month earlier, where he had suggested the opposite. Meanwhile, underlying inflation indicators in the US accelerated in Q2, as new tariffs and surging energy prices pushed up costs across a range of industries.
