Bank of America strategists led by Michael Hartnett framed Kevin Warsh’s Jackson Hole keynote as a binary event for the Treasury market. In the optimistic scenario, the Fed Chair would deliver a balanced message that flattens the yield curve and supports risk assets; in the pessimistic scenario, ambiguous or uncoordinated communication with the Treasury would push yields to record levels. The 30-year Treasury yield has reached 5.34%, its highest level since 2007, while US national debt has crossed the $40 trillion threshold and July CPI inflation stands at 3.4%, or 70% above the Fed’s 2% target. According to a mid-August BofA survey of fund managers, 69% of respondents expected a neutral tone from Warsh, meaning the market has already positioned for a non-event.
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