Fixed Income Update
The bond market spent most of the week trading in a narrow range as investors waited for Federal Reserve Chair Kevin Warsh’s first appearance at the annual Jackson Hole Economic Symposium.
Since becoming Fed Chair in May, Warsh has emphasized that markets should respond more to underlying economic conditions and less to signals from the central bank. That approach marks a meaningful shift for investors who had grown accustomed to clearer guidance about which data points policymakers were watching and how they might respond. Rather than reducing volatility, however, the change has so far made Treasury trading more sensitive to Warsh’s public remarks. The three largest daily moves in U.S. Treasuries since he became chair have followed his appearances, underscoring the challenge of moving toward what he has described as a quieter Fed.
In Friday’s speech, Warsh reaffirmed the Fed’s traditional 2 percent inflation objective, calling it a firm, fixed target. With inflation having remained above that goal for more than five years, he said policymakers must be confident that inflation is moving toward the objective clearly and at a sufficient pace. Otherwise, he said, the Fed still has work to do. He also noted that financial conditions do not appear broadly restrictive and that short-term interest rates remain the central bank’s main tool for achieving its mandate. While those comments leaned hawkish, Warsh stopped short of explicitly signaling support for a rate increase at the Fed’s next meeting.
The tension between Warsh’s communications strategy and recent Treasury actions also remained in focus. Warsh has argued that the Fed should speak less so market prices can provide a clearer read on the economy. Treasury Secretary Scott Bessent has taken a different approach, intervening in recent weeks to limit pressure on long-term Treasury yields and saying that prices for long-term bonds appeared out of whack. That contrast has raised questions about how independently the Fed and Treasury are interpreting market signals at a time when long-term rates remain elevated.
By the end of the week, the market reaction suggested investors were taking Warsh’s inflation message seriously. Two-year Treasury yields rose as much as 11 basis points to 4.34 percent, while 30-year yields were little changed at 5.2 percent. That flattening move signaled greater concern that the Fed may need to raise short-term rates to restore confidence in its inflation target. The September 16 meeting now appears to be live, with markets pricing in a greater than 50 percent chance of a rate increase.
As of August 28, 2026
|
Index |
Current |
Last Week |
Wk Chg |
Last Year |
Yr Chg |
|
Tax-exempt MMF |
2.28% |
2.36% |
-.08% |
2.76% |
-.48% |
|
Taxable MMF |
3.67% |
3.67% |
.00% |
4.29% |
-.62% |
|
|
|
|
|
|
|
|
2-Year Treasury |
4.35% |
4.24% |
.11% |
3.63% |
.72% |
|
5-Year Treasury |
4.49% |
4.43% |
.06% |
3.69% |
.79% |
|
10-Year Treasury |
4.73% |
4.74% |
-.01% |
4.21% |
.52% |
|
30-Year Treasury |
5.21% |
5.27% |
-.07% |
4.88% |
.33% |
|
5-Year Exp. Inflation |
2.32% |
2.34% |
-.02% |
2.53% |
-.21% |
|
|
|
|
|
|
|
|
2-Year Municipal** |
2.57% |
2.65% |
-.08% |
2.34% |
.23% |
|
5-Year Municipal** |
2.95% |
2.97% |
-.02% |
2.54% |
.41% |
|
10-Year Municipal** |
3.48% |
3.46% |
.02% |
3.44% |
.04% |
|
30-Year Municipal** |
4.80% |
4.68% |
.12% |
4.87% |
-.07% |
|
|
|
|
|
|
|
|
Fed Funds |
3.75% |
3.75% |
.00% |
4.50% |
-.75% |
|
Prime Rate |
6.75% |
6.75% |
.00% |
7.50% |
-.75% |
|
Dollar*** |
$99.71 |
$98.80 |
$0.91 |
$97.81 |
$1.90 |
|
CRB |
$405.17 |
$406.24 |
-$1.07 |
$301.75 |
$103.42 |
|
Gold |
$4,489.90 |
$4,624.10 |
-$134.20 |
$3,445.80 |
$1,044.10 |
|
Crude Oil |
$83.40 |
$87.06 |
-$3.66 |
$64.60 |
$18.80 |
|
Unleaded Gasoline**** |
$3.51 |
$3.35 |
$0.16 |
$2.01 |
$1.50 |
* Composite A
** General Obligation AA+
*** Int'l value of the U.S. dollar (Avg. exchange rate between the dollar and 6 major world currencies).
**** Futures price per gallon
Stock Market Update
After a down week for US stocks, equities appeared to regain some momentum as technology shares helped to lift US index returns. Two events dominated investor attention: Nvidia’s fiscal second-quarter results and Federal Reserve Chair Kevin Warsh’s keynote address at the Jackson Hole Economic Policy Symposium. The US equity market responded favorably to Nvidia’s results, but Warsh’s hawkish tilt weighed on market sentiment Friday morning. Even with that pullback, major US indices remained on pace for a positive finish to the last full week of August.
With potentially market-moving events on tap for the back half of the week, broad market moves were muted early this week, with the S&P 500 little changed through Wednesday’s close. Semiconductor and memory stocks sold off again Monday, with the iShares Semiconductor ETF (SOXX) down 2.7% and the Roundhill Memory ETF (DRAM) declining 5.9%. The momentum trade improved Tuesday. After Wednesday’s close, Nvidia reported second-quarter results that exceeded estimates and it issued stronger-than-expected full-year revenue growth guidance of 70% for fiscal 2028. CEO Jensen Huang said demand is above that level, with supply-chain constraints limiting faster growth. Nvidia shares surged higher by 8.7% on Thursday, adding roughly $440 billion in market value and helped to pull the broader market higher. Semiconductor stocks rallied in sympathy, while software shares advanced after constructive results and commentary from CrowdStrike, Salesforce, and Okta. Those results eased concerns that AI adoption would disrupt software business models. The iShares Expanded Tech-Software ETF (IGV) jumped 7.7% Thursday.
Warsh’s Jackson Hole remarks drove a hawkish shift in market-implied expectations for the Fed’s September meeting. While he stated that the US economy “appears to have strengthened”, he emphasized that price stability was more concerning and noted bringing inflation back to the Fed’s 2% target should be the focus at this time. Although Warsh did not provide any guidance, investors interpreted his commentary as hawkish. By late Friday morning, the CME FedWatch Tool showed a 57.5% probability of a September rate hike, up from 35.4% on Thursday. US equities gave back part of their week-to-date gains Friday morning as investors reassessed the policy backdrop.
Oil prices moved modestly lower despite few incremental developments in the US-Iran conflict. Reports of tanker traffic through the Strait of Hormuz helped relieve some supply concerns, pushing WTI crude to around $80/barrel before prices moved back above $83/barrel by Friday morning. On the sanctions front, Treasury Secretary Scott Bessent announced Operation Economic Outcast on Monday, targeting Iranian companies and individuals. However, the sanctions offered limited clarity on China, a key Iranian trade partner, leaving investors questioning whether additional measures could complicate US-China relations. Negotiations between the US and Iran remain at a standstill.
The week’s two major catalysts pulled US equities in opposing directions. Nvidia reinforced the durability of AI-related earnings growth, while Warsh’s comments reminded investors to keep a focus on inflation and policy uncertainty. The balance between earnings momentum and interest-rate expectations is likely to remain a driver of equity returns for the remainder of the year. Strong profit growth can continue to support valuations, but Fed policy may limit multiple expansion. The market now enters September, a month that has historically been challenging for equities. The next major event on investor calendars is the Fed’s September 15–16 meeting, where market odds for a rate hike are more or less a coin flip. Until then, incoming labor and inflation data could drive near-term volatility.
As of August 27, 2026
|
Index |
Current Week |
Month of Aug. |
YTD |
|
Dow Jones Industrial Avg. |
0.57% |
2.20% |
12.60% |
|
S&P 500 |
0.75% |
3.31% |
13.79% |
|
Nasdaq |
1.38% |
4.65% |
14.63% |
|
MSCI EAFE |
-0.21% |
2.09% |
14.34% |
|
Russell Mid Cap |
-0.11% |
3.33% |
18.40% |
|
Russell 2000 |
-0.11% |
2.93% |
22.34% |
