JPM | US MACRO THEMATICS - Wishy WARSHy: Bond Vigilantes vs. Equity Bulls

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JPM | US MACRO THEMATICS - Wishy WARSHy: Bond Vigilantes vs. Equity Bulls

Specialist Sales

US Specialist Sales J P M O R G A N

30 July 2026

Plainly stated: Warsh offered effectively zero explanation for the Fed's choice of action yesterday, and that will be what

defines Treasury markets until told otherwise. One of the more ironic outcomes of yesterday's meeting was that every single

asset in the market repriced except the one Warsh is meant to be controlling. In addition to the surge that took place in long-dated

yields, the dollar fell on short-term interest rate differentials (because September FOMC hike odds fell to just 65%) while

precious metals spiked and equities crumbled. JPM’s FX franchise noted that yesterday was the 4th largest USD sale day of

the year with a -2.5 z-score.

Perhaps one could assert that this was the plan all along. Warsh explicitly said in his presser that recent movements in

financial markets are doing some of the Fed's job for them by acknowledging that the bond sell-off in-between meeting

periods was functioning as a substitute for tightening. And the bond market reacted to this by selling off further. Otherwise

stated, the market didn’t get a hike from the committee yesterday, it got a hike from bond markets. Another way to think about

this, is that Warsh didn’t deliver a deliberate, communicated policy choice. No forward guidance, alongside no explanation for

yesterday's decision making reads as the Fed being less in control of the inflation path, not more.

But why does the bond market want tightening?

My colleague Brendan Henrici phrased it very well in his daily: “Implicit in the rise in the long end of the yield curve was a

message: the rolling supply disruptions in energy are not a “bug” or a transitory phenomenon.