2-year Treasury yield jumps as Warsh says Fed may ‘have work to do’

The 2-year Treasury yield jumped Friday, after Federal Reserve Chairman Kevin Warsh in his keynote address at Jackson Hole said the central bank still has “work to do” in regards to inflation, raising expectations of an interest rate hike.

The yield on the 2-year Treasury note, which typically reacts in line with short-term Federal Reserve interest rate decisions, was more than 8 basis points higher at 4.314% — or the highest going back to July.

The 10-year Treasury note was 2 basis points higher at 4.692%, while the 30-year Treasury bond yield was 1 basis point lower at 5.179%.

One basis point equals 0.01%. Yields and prices move inversely.

Warsh in his keynote address at Jackson Hole, Wyoming acknowledged that inflation is running hot, saying, “While this summer’s PCE and CPI readings were better than expected, they do not tell me that underlying trends have meaningfully improved.”

He added, “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do. That’s our job . . . our mandate . . . and our charge to keep.”

Odds of an interest rate hike coming in September rose Friday to 41.7%, up from 35.4% one day ago, according to the CME FedWatch Tool.