Bond yields and Bessent moves challenge Fed's Warsh

US Treasury Secretary Scott Bessent's effort to lower long-term Treasury yields has added to the challenge facing Federal Reserve Chair Kevin Warsh before his Jackson Hole speech on Friday.

The Treasury Department said last week that it planned to “at least double” purchases of longer-dated bonds. The move came a day after 30-year US Treasury bond yields reached their highest level since 2007.

Bessent said he viewed the yields as not reflecting market realities. But analysts said the intervention could complicate Warsh's message on inflation and financial conditions.

Warsh said in June that he was comfortable with lower bond yields, then said six weeks later that higher yields were doing some of the Fed's financial tightening work. Richard Berner, co-director of the Stern Volatility and Risk Institute at New York University, said the Treasury policy had added uncertainty rather than reducing it.

Ehud Ronn, a finance professor at the University of Texas at Austin, said Bessent had had “very mixed success” in trying to lower yields. Some observers saw any moderation in yields as depending more on oil prices than on future Treasury action.

The Fed has not raised interest rates since December 2025, even as inflation has remained a concern after US President Donald Trump's war on Iran pushed oil prices higher. Higher interest rates set by the Fed or demanded by bond markets can help restrain inflation by cooling demand.

Warsh is due to deliver the opening address at the annual central bankers conference in Jackson Hole, Wyoming. Analysts said he will be expected to address Treasury intervention in the bond market and explain how the Fed intends to protect its inflation-fighting credibility.

Under Warsh, the Fed has pared back official monetary policy announcements. Analysts said markets have been uncomfortable with the approach and want clearer explanations of what the Fed is doing and why.