There’s a simple way the Fed could help calm the bond market

Investors are increasingly worried about government deficits and persistent inflation, driving up the price of money. The Federal Reserve can ease some of those nerves.

The conflict in the Middle East intensified last week, pushing up energy prices again and forcing heavily indebted countries to borrow more to increase defense spending and fund the war. That deepened a global rout in the bond market, sending yields to multi-year and multi-decade highs . Higher yields raise borrowing costs for consumers for everything from mortgages and credit cards to the US government’s $40 trillion debt.

Fed Chairman Kevin Warsh has been mostly silent on where he believes interest rates could be heading. However, in a major speech last month at an economic symposium in Jackson Hole, Wyoming, Warsh gave markets a hint , saying there was more “work to do” in fighting inflation — a signal that rate hikes could be around the corner.

Investors welcomed Warsh’s Jackson Hole speech, underscoring how keen they are to get more clarity on his economic views. Fiscal concerns and a flood of corporate borrowing to fund the AI build-out are the biggest drivers of the surge in yields. But greater transparency from Warsh could be an important source of stability for the bond market — and a much better alternative to the central bank deploying its massive $6.7 trillion balance sheet to control yields, as it did during the Great Recession and World War II.

“The Fed’s responsibility is confined to just controlling inflation and if Warsh can just explain policy better in the next few months, then that source of anxiety is likely to ease,” Derek Tang, a policy economist at Monetary Policy Analytics, told CNN. “But the Fed does have firepower with its unlimited balance sheet.”

US Treasury yields ticked slightly higher on Tuesday as traders monitored oil prices and geared up for inflation data set to be released later this week. After surging last week, yields were steadier this week. The 10-year yield traded at 4.79%, near its highest level since 2025 and on the cusp of its highest level since 2023.

Warsh has said repeatedly that the Fed is committed to its 2% annual inflation target. But that hasn’t been enough to reassure bond investors.

Shortly after Warsh held a news conference following the Fed’s July monetary policy meeting, long-term bond yields surged. That was likely a reflection of doubts about the Fed chairman’s commitment to taming inflation, an adjustment period to a quieter Fed , or simply expectations for future rate hikes.

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But Warsh has not provided what’s known as a “reaction function,” which is the central bank’s explanation of “what it is watching, how it interprets the economy, how it weighs competing risks, and what developments would change its judgment,” according to the Brookings Institution.

While Warsh didn’t flesh out a reaction function in his Jackson Hole speech, his signal that rate hikes may be coming was a step in the right direction.

“Warsh needs to continue to refine how he communicates with markets,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. “Part of that is providing assurance that policymakers will take policy action in a reasonable time frame.”

Markets see a roughly 60% chance the Fed will raise rates at its meeting next week, underscoring the persistent uncertainty on Wall Street. That would mark the first rate increase in more than three years. Investors expect at least one more rate hike by year’s end, but the timing remains unclear.

But the Fed does have an unconventional tool to influence long-term yields: Its balance sheet. Yet it is highly unlikely the central bank will use it.

“The Fed has the ammo to be much more impactful on the level of interest rates by introducing quantitative easing,” said Mike Goosay, chief investment officer and global head of fixed income at Principal Asset Management. “But I don’t think that’s going to happen.”

In response to the Great Recession, the Fed massively expanded its balance sheet by buying up bonds and mortgage-backed securities to inject money into the financial system and stimulate the economy at a time when interest rates were already near zero. Warsh, who was a Fed governor during that period, said he supported the first round of quantitative easing, or QE, as an extraordinary emergency measure.

But officials later introduced two more rounds of QE, which succeeded in stabilizing markets and aiding an economic recovery. But it prompted Warsh to resign. At the time, Warsh described the Fed’s large-scale asset purchases as “reverse Robin Hood,” arguing that it benefited wealthy asset owners while hurting everyday households. Since becoming Fed chairman, Warsh has stressed that the central bank must go back to basics, making it highly unlikely that he would support QE this time around.

That wasn’t the only time the Fed has used its balance sheet to influence long-term borrowing costs.

“In World War II, the Fed thought it had a duty to support the war effort, so it used its balance sheet to hold down bond yields to make sure that the government could spend more,” Tang said. “But we’re not in a world war right now.”

The Fed did this by setting a fixed low price for Treasury bills and long-term bonds, then bought all the bonds that private buyers did not want — all while keeping short-term interest rates low.

But this policy came at a cost: The Fed effectively surrendered its independence, making it harder for policymakers to tame inflation. That arrangement ended with the 1951 Treasury-Fed Accord, which restored the central bank’s independence from the Treasury.

Warsh has said the Fed’s independence is essential — and that matters for the bond market. If investors believe that the Fed is willing to make unpopular monetary policy decisions to control inflation, they are more likely to have trust in its commitment to price stability.

Ultimately, convincing investors that it will act to keep inflation under control is the simplest tool the Fed has to calm the bond market.

CNN’s John Towfighi contributed reporting.

投资者日益担忧政府赤字和持续通胀，导致资金成本上升。美联储或许能够缓解部分投资者的这种担忧。

上周中东冲突加剧，再次推高能源价格，迫使负债累累的国家增加借贷以扩大国防开支，为战争筹集资金。这加剧了全球债券市场的暴跌，收益率飙升至多年来的最高水平。收益率上升意味着消费者借贷成本增加，从抵押贷款、信用卡到美国政府高达40万亿美元的债务，无一例外。

美联储主席凯文·沃什一直对利率走向保持沉默。然而，在上个月于怀俄明州杰克逊霍尔举行的经济研讨会上，沃什发表重要讲话，暗示市场仍有“更多工作要做”，以应对通胀——这或许预示着加息即将到来。

投资者对沃什在杰克逊霍尔的演讲表示欢迎，这凸显了他们渴望更清晰地了解他的经济观点。财政担忧以及企业为人工智能建设而进行的巨额借贷是收益率飙升的最大驱动因素。但沃什提高透明度可能成为债券市场稳定的重要来源，而且比央行动用其庞大的6.7万亿美元资产负债表来控制收益率要好得多，后者曾在大衰退和二战期间这样做过。

“美联储的职责仅限于控制通胀，如果沃什能在未来几个月更好地解释政策，那么这种焦虑情绪可能会缓解，”货币政策分析公司（Monetary Policy Analytics）的政策经济学家德里克·唐（Derek Tang）告诉CNN。“但美联储确实拥有强大的政策火力，因为它拥有无限的资产负债表。”

周二，美国国债收益率小幅走高，交易员密切关注油价走势，并准备迎接本周晚些时候即将公布的通胀数据。上周收益率飙升后，本周趋于稳定。10年期国债收益率报4.79%，接近2025年以来的最高水平，并即将触及2023年以来的最高水平。

沃什曾多次表示，美联储致力于实现2%的年度通胀目标。但这并未能让债券投资者安心。

在美联储7月货币政策会议后，沃什举行新闻发布会不久，长期债券收益率飙升。这可能反映出市场对美联储主席抑制通胀决心的疑虑，也可能反映出市场正在适应美联储较为低调的政策，或者仅仅是对未来加息的预期。

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但沃什并没有提供所谓的“反应函数”，布鲁金斯学会称，反应函数是中央银行对“它正在关注什么、如何解读经济、如何权衡相互竞争的风险以及哪些事态发展会改变其判断”的解释。

虽然沃什在杰克逊霍尔的演讲中没有详细说明反应函数，但他暗示可能会加息，这是一个正确的方向。

“沃什需要继续改进他与市场的沟通方式，”Plante Moran Financial Advisors首席投资官吉姆·贝尔德表示，“其中一部分工作是让市场相信，政策制定者会在合理的时间范围内采取政策行动。”

市场普遍认为美联储下周会议加息的可能性约为60%，这凸显了华尔街持续存在的不确定性。这将是三年多来的首次加息。投资者预计年底前至少还会加息一次，但具体时间仍不明朗。

但美联储确实拥有影响长期收益率的非常规工具：资产负债表。然而，美联储极不可能动用这一工具。

“美联储有能力通过引入量化宽松政策来对利率水平产生更大的影响，”Principal Asset Management首席投资官兼全球固定收益主管迈克·古赛表示，“但我认为这种情况不会发生。”

为应对大衰退，美联储大幅扩张资产负债表，大量购买债券和抵押贷款支持证券，向金融体系注入资金，刺激经济，而当时的利率已接近于零。沃什当时是美联储理事，他表示支持第一轮量化宽松（QE）作为一项非常规的紧急措施。

但美联储官员随后又推出了两轮量化宽松政策，成功稳定了市场并促进了经济复苏。但这却导致沃什辞职。当时，沃什将美联储的大规模资产购买计划形容为“反向罗宾汉”，认为这让富有的资产所有者受益，却损害了普通家庭的利益。自担任美联储主席以来，沃什一直强调央行必须回归基本政策，因此他这次不太可能支持量化宽松政策。

这并非美联储唯一一次利用其资产负债表来影响长期借贷成本。

唐表示：“二战期间，美联储认为有义务支持战争，因此利用其资产负债表压低债券收益率，以确保政府能够增加支出。但我们现在并没有处于世界大战时期。”

美联储通过设定国库券和长期债券的固定低价来实现这一目标，然后购买所有私人买家不想要的债券——同时保持短期利率在低位。

但这项政策也付出了代价：美联储实际上放弃了独立性，使得政策制定者更难控制通货膨胀。1951年的《财政部-美联储协议》结束了这种安排，恢复了央行相对于财政部的独立性。

沃什曾表示，美联储的独立性至关重要——这对债券市场意义重大。如果投资者相信美联储愿意做出不受欢迎的货币政策决定来控制通胀，他们就更有可能信任美联储对价格稳定的承诺。

归根结底，让投资者相信美联储会采取行动控制通胀，是美联储安抚债券市场最简单的工具。

CNN的约翰·托菲吉对此报道亦有贡献。