Fed's Warsh Holds Rates Steady; Treasury Selloff Wipes About $115 Billion
BlockBeats reported Aug. 3 that Federal Reserve Chair Kevin Warsh kept interest rates unchanged last week, a decision that nevertheless sparked sharp moves across the bond market. Several veteran bond-fund managers said the market's repricing delivered a tighter financial effect than a conventional rate hike.
Eric Hickman, founder of Lantern Capital, estimated that by last Friday's close—after the Fed decision and Chair Powell's press conference—the combined market value of U.S. Treasuries, notes and bills across maturities had fallen by about $115 billion. He added that if the Fed had raised rates by 25 basis points and yields on bonds with five years or less to maturity had risen by the same amount, an extreme case would have produced roughly $65 billion in losses, still below the drawdown seen in the latest bout of volatility.
Hickman argued that Warsh generated a stronger tightening impulse by letting markets reset prices rather than lifting the policy rate, while also avoiding an explicit commitment to keep rates elevated for an extended period. Market data show that on Friday the 30-year U.S. Treasury yield jumped to 5.229%, the highest in nearly 19 years, while the 10-year yield climbed to 4.688%, the highest since January 2025.
Hickman said it remains unclear whether Warsh deliberately used market reactions as a policy lever. He noted that Warsh has long favored scaling back forward guidance and letting markets digest incoming economic information, an approach he said was evident in the latest decision. The stance is not universally shared inside the Fed: St. Louis Fed President Musalem said monetary policy responsibility rests with the FOMC, not financial markets, signaling concern about "relying on market adjustments to achieve policy outcomes."
