Bond Market’s Warsh Trade Falls Apart as Oil Fans Inflation Risk

The Federal Reserve held its latest policy meeting this week with inflation still elevated, the war in Iran still rattling energy markets, and a new Chair waiting to be confirmed by the Senate. Former economic adviser to President Bush and Columbia Business School dean Glenn Hubbard breaks down what the Fed’s decision signals about the economy and what Kevin Warsh’s incoming leadership could mean for the institution’s purpose, strategy, and independence.Source: Bloomberg

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By Michael MacKenzie and Ye Xie

May 12, 2026 at 9:15 AM UTC

Updated on

May 12, 2026 at 12:56 PM UTC

Not long ago, the Treasury market thought it had the Kevin Warsh trade figured out: Simply bet on the multiple interest rate cuts that the nominee had been expected to deliver if he got the job to lead the Federal Reserve.

Now, with days left before Warsh steps into the central bank’s top role, a different view is emerging. Instead of rate cuts, wagers in the $31 trillion bond market are leaning toward tighter monetary policy, the upshot of robust US growth and war-driven inflation worries. Yields on 30-year Treasuries are nosing at 5%, while bets on a steeper yield curve — an outgrowth of the market’s earlier easing expectations — have largely been undone.