Hey Kevin, Bonds Are Screaming Again
“No dot Warsh, no guidance, no support for bonds”. Copyright 2026. nextlevelcorporate. nextlevelcorporate prompts, AI image.
Can you hear the signal?
Have you noticed what's been happening in U.S. bond markets these last couple of months? Front end going nowhere, long end absolutely running away from home?
Regular readers will remember I wrote to Jay back in January about exactly this: bonds screaming, term premia normalising, Powell copping it from the vigilantes because they didn't trust him to fight inflation.
Well, six months on, we've got a new Chair, and the vigilantes are back at it. Same script, different excuse.
Below is the same trick I pulled on the Powell curve. Two dates, defaced with my own commentary and the bps moves that matter. This time it's 18 June 2026 in blue (the day after Kevin Warsh's first FOMC meeting as Chair) against 29 July 2026 in red (his second meeting, the one where three of his own colleagues voted to hike).
The short end of the curve, and why it's not moving
Simply put, the front end isn't going anywhere.
Twos have drifted about 6 basis points in six weeks. Nothing. That's the Fed funds range doing its job: 3.50% to 3.75%, held twice now, and markets currently pricing something like a 63-68% probability of a hike in September, not a cut.
Compare that to where we were with Jay, back then the story was cuts priced in that were never coming. Markets had faded Powell’s hawk for years, ever since March 2022 when interest rates were lifting off. And the only reason equities went their way in the end was as a result of liquidity, not an interest rate pivot that never happened. Instead, rates went up and long bond holders had their faces ripped off.
Now the story has flipped entirely. Hikes are on the table, and the short end knows it, sitting tight and waiting for confirmation.
The long end, and why this time it's not really about inflation
Here's where it gets interesting, and where this is genuinely a different animal to the Powell episode. Back in January, the long end was steepening because bondholders didn't trust Powell to fight inflation. They thought he cared more about his own political standing than price stability. That was a trust problem.
This time, Warsh doesn't have a trust problem. If anything, markets think he's more hawkish than the last guy. What he has is a communication problem, and it's one of his own making. The 10-year is up 20 basis points since his first meeting. The 30-year is up 29 basis points, and sitting at its highest level since 2007, nineteen years. And why? Because Warsh walked into the job and immediately stopped talking. No dot plot at his first meeting. He was the only one of nineteen officials who didn't submit a rate projection. A statement cut down to three substantive paragraphs. Forward guidance dropped entirely. And on top of that, five task forces (communications, balance sheet, data, productivity, inflation frameworks) that won't report back to him until year-end.
So the vigilantes aren't punishing Warsh for being soft on inflation. They're punishing him for refusing to tell them anything at all, while inflation stays elevated and Hormuz-driven oil prints keep showing up in the CPI data. He's said in as many words, that he thinks it's a good thing if the bond market moves on the data instead of the Fed's word. Fine, except when you take the anchor away entirely, the bond market doesn't calmly price the data. It prices the full range of everything that could go wrong, and it prices it violently, every single meeting.
What now?
If this keeps up, the 30-year printing north of 5.2% may not be the ceiling.
We're already at levels not seen since 2007, and there's nothing in Warsh's playbook that suggests he's about to hand the market a heads up to calm things down. Quite the opposite. His own task forces are explicitly reviewing whether the dot plot should exist at all. Add in a Fed that's genuinely split three ways on the committee, oil that's whipsawing on every Hormuz headline, and a Strategic Petroleum Reserve that's basically empty for the first time since 1983, and you've got every ingredient for the long end to keep running well past where anyone's comfortable, all other things being equal.
The short end, by contrast, will keep doing exactly what the Fed funds rate tells it to do, which for now looks like "wait for September and see."
From a corpdev perspective, this is the same warning as it was during the Powell puke.
Higher long rates mean a higher discount rate on every project and acquisition you're underwriting, and that makes deals harder to bank, fund, and get over the line, regardless of whether the reason is political distrust or a Chair who's simply gone quiet, AWOL, or just plain mysterious.
The mechanism doesn't care about the motive. Your WACC goes up either way.
Final thoughts
Summing it up, open letter style, the way I did for Jay, is as follows 👇
"Hey Kevin, we heard you loud and clear at your first press conference. Not a single word out of you, no dot, no guidance, nothing. You reckon it's healthy for us to price the data ourselves instead of hanging on the Fed's every word? Careful what you wish for. We've been pricing it ourselves, alright. 20 basis points on the 10-year, 29 on the 30-year, and a long bond at its highest since 2007, all in the space of six weeks [insert extended middle finger]. You've got five task forces working on whether you even owe us a dot plot, and they don't report back till December. So until then, we're not waiting around for guidance that isn't coming, we're setting the price ourselves, and we're not being gentle about it. Disaffectionately yours, but only until you say something useful, the Bond Market."
See you in the market 🖐
Mike
Macro first. Strategy second. Deal third.
An independent corporate development studio, established in Perth in 2001, advising you when — and when not — to do the deal. In 25 years, that discipline has been the difference.
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