The 30-year Treasury yield touched its highest level since 2007 while Federal Reserve Chair Kevin Warsh took questions on Wednesday, after the central bank left its main rate unchanged for a fifth straight meeting. Stocks followed the bond market down, with the S&P 500 off 1.5% and the Nasdaq 100 down 2.1%.
The yield on the 30-year Treasury bond spiked higher as Warsh's Wednesday press conference progressed, a sign the market is worried the central bank isn't prepared to lower inflation with interest-rate hikes. During the same appearance, the long bond's yield touched its highest intraday level since 2007.
After the decision landed, the 30-year yield rose as much as 0.14 percentage points to 5.23% — its biggest move since April 2025.
Steve Sosnick, chief strategist at Interactive Brokers, put it this way: "the market is calling his bluff on inflation". He said the stock market was destined to follow once bond traders got to work.
Fed holds at 3.5% to 3.75% as three officials dissent
The Fed left its main rate at 3.5% to 3.75% for the fifth straight meeting, and Warsh argued that a rise in bond yields between the June and July meetings had essentially tightened monetary policy. Markets had predicted a roughly one-in-three chance that the Fed would raise rates on Wednesday, unusually high odds that had prompted some investors to wager on a surprise increase.
Wednesday's decision drew dissents from a trio of FOMC members — Lorie Logan of the Dallas Fed, Cleveland's Beth Hammack and Minneapolis's Neel Kashkari — who argued that borrowing costs should be raised immediately.
Stocks follow the bond market lower
US stocks fell sharply as borrowing costs rose, leaving the broad S&P 500 down 1.5%. The Nasdaq 100, which is full of tech stocks that are vulnerable to rises in bond yields, fell 2.1%.
Warsh said the central bank was prepared to do what is needed to bring inflation, which registered 4.1% in May, to the Fed's 2% goal — a target it has failed to hit for more than five years.
Sources: MarketWatch, Financial Times
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