US long-term borrowing costs hit their highest levels since 2007 as investors balked at Federal Reserve Chairman Kevin Warsh’s new stripped-down communications strategy.
Yields on 30-year Treasury bonds touched 5.24% after Wednesday’s Fed meeting, when Warsh made good on his promise to pare back guidance that, in his view, the market has come to overanalyze and overrely on.
Warsh is retraining investors to do their own work. But that muscle will take a while to rebuild after more than a decade of hand-holding by a central bank wary of surprising the market. The immediate result was chaotic: a spike in bond yields, paired with declines in stocks and the dollar, that Bank of America’s strategist called “a classic central-bank credibility shock” in a note to investors.
