U.S. Treasury yields show signs of divergence as Wash faces early challenges

ME News reports that on May 15 (UTC+8), recent sharp volatility in the U.S. Treasury market has presented a significant early challenge for incoming Federal Reserve Chair Kevin Warsh. Subadra Rajappa, Head of Americas Research at Société Générale, told Bloomberg Television on May 15 that bond yields have shown clear anomalies due to rising expectations of inflation. Rajappa noted that energy price surges triggered by the Iran conflict are intensifying inflationary pressures in the U.S., limiting Warsh’s room to pursue rate cuts—a policy direction he previously supported and that President Trump has demanded. She bluntly stated, “I’m starting to get concerned because bond yields do appear to be getting out of control; we should take seriously the signals coming from the bond market.” Market expectations for interest rates have also shifted rapidly. Bloomberg data shows traders now assign nearly a two-thirds probability to a Fed rate hike before December. By contrast, on February 27—the day before the U.S. and Israel launched military action against Iran—the market widely anticipated more than two rate cuts for the year. (Source: ODAILY)