Treasury yields continue to rise as Wall Street calls out Fed’s ‘inflation credibility shock’
Ines Ferré· Senior Business Reporter
Thu, 30 July 2026 at 7:38 pm GMT+5:30
2 min read
What happened:Long-dated Treasury bond yields stayed elevated on Thursday as investors digested the Fed’s decision to hold rates steady, while Wall Street pointed to signs of credibility trouble at the central bank
The 10-year Treasury (^TNX) rose to 4.66% while the 30-year Treasury (^TYX) yield was at 5.21%, its highest level since 2007
What’s behind the move:While the two-year bond yield shed four basis points during Fed Chairman Kevin Warsh’s presser on Wednesday, the 10-year and 30-year inched higher
The move on long-dated yields signals investors worry the Fed is falling behind the curve on inflation, prompting them to demand a higher yield premium to lock up capital long-term
“Market moves post meeting were consistent with a central bank inflation credibility shock,” Bank of America Global Research economist Aditya Bhave and his team wrote
“Ironically, we think the need to reestablish credibility increases the probability that the Fed will hike in September, all else equal,” they added
The firm predicts that the Fed will hike by 25 basis points each at its remaining three meetings this year
Polymarket bettors raised their odds of a September rake hike to 56% following Warsh’s presser
What else you need to know:Fed Chairman Kevin Warsh has indicated he would not be providing forward guidance in order for the market to react
Though Warsh reiterated the Fed’s determination to bring inflation back down to 2%, his commentary during the presser seemed to shift. BofA economists noted the “little information he shared was rather dovish.”
Warsh mentioned that while the Fed will continue to target PCE inflation for now, that could change once the task forces he has set up to review data have delivered their recommendations
“This opens the door for cherry picking of indicators to justify a dovish stance,” BofA economists said
Warsh also signaled that rate hikes aren’t the only tool for lowering inflation. He repeatedly implied that markets are tightening for the Fed, as long-dated bond yields have risen over the past few weeks, raising borrowing costs
“But we don’t think the Fed can get markets to do its work indefinitely by just talking tough. It has to eventually walk the talk, or risk losing credibility,” the analysts noted
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at@ines_ferre
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