Warsh's remarks also come as investors continue to weigh Treasury Secretary Scott Bessent's move last week to at least double the size of longer-dated debt buybacks, which he attributed to yields rising more than fundamentals justified.
That stance appears to contrast with Warsh's own approach, as he has spoken of the Fed taking more cues from bond market movements.
The Treasury will sell $44 billion in 7-year notes on Thursday, the final sale of $183 billion in short- and intermediate-dated supply this week. The U.S. government saw good demand for a $70 billion sale of 5-year notes on Wednesday and for $69 billion in 2-year notes on Tuesday.
Yields and curve move after inflation and labor data
The 2-year note US2YT=RR yield, which typically moves in step with Fed interest rate expectations, fell 0.64 basis points to 4.218%.
The yield on benchmark U.S. 10-year notes US10YT=RR was down 0.36 basis points at 4.66%.
The yield curve between 2- and 10-year notes US2US10=TWEB steepened to 44 basis points.
Warsh has established five task forces to review the Fed's operational and monetary frameworks, including one examining the data the central bank uses in its decision-making.
He has indicated a preference for alternative inflation measures that may show more moderate price pressures than the Personal Consumption Expenditures (PCE) data the Fed has traditionally relied on.
“He still has a good amount of deniability on inflation because the PCE is the Fed's target measure, but he looks at something a lot broader than that,” Brien said.
PCE data for July on Wednesday showed that annual U.S. inflation held steady in July well above the Federal Reserve's 2% target for the 65th straight month.
Separately, data on Thursday showed that the number of Americans filing new claims for unemployment benefits fell for a second straight week while the overall number of people on jobless relief rolls slid to the lowest level in a month, suggesting the labor market remains stable despite a surprise drop in employment in July.
Treasury yields ease as traders await Jackson Hole remarks
U.S. Treasury yields slipped on Thursday as traders awaited Federal Reserve Chairman Kevin Warsh's appearance at the central bank's Jackson Hole Symposium on Friday for further clues on interest rate policy.
Longer-dated yields rose following the Fed's July meeting after Warsh was seen as failing to offer enough concrete steps for addressing persistently high inflation. Warsh is presiding over a divided Fed, with several policymakers calling for interest rate increases to stem ongoing price pressures.
Traders are also grappling with Warsh's preference for less forward guidance, which suggests Friday's appearance may yield few new clues.
“He's not going to back away from the changes that he wants to make and how the Fed runs policy, and he's not going to foreshadow what's coming in September,” said Lou Brien, market strategist at DRW Trading.
Traders are pricing in 31% odds of a rate hike at the Fed’s September meeting, rising to 74% by December.
TLT•
