Kevin Warsh speech: After the long-awaited US Fed Chairman Kevin Warsh’s Jackson Hole speech at the Fed’s annual conference, US Treasury yields skyrocketed along with the US dollar, putting pressure on other assets like equities, gold, silver, bitcoin, and other cryptocurrencies. This is not the first time this has happened. On the previous two occasions, his post-policy meeting press conferences in June and July also saw the sharp rise in the US Treasury bonds.
According to market experts, the US Central Bank is trying to tokenise its bonds to overcome the redemption challenge. The US adminstration is not in mood to leave the dominance of the US Dollar (USD) in the global merchandise and they want their bonds to be less regulated and more driven by the market sentiments. Experts said that these are the three major reasons that has forced the US administration to revamp their bond market policy and the US Fed’s communication policy.
Tokenisation of the US bonds
Speaking on the major reason for rise in the bond yields after the US Fed Chairman Kevin Warsh’s speech, Sandeep Pandey, Co-founder of Basav Capital, said, “Few days ago, when the gold prices were skyrocketing, countries like Russia, China, India, Brazil, and some more developing economies of the third world, were converting their bonds into physical gold. The vision behind this gold hording was to create bond redemption problem for the US administration.”
Pandey said the US administration is now trying to come out of this net by tokenising its treasuries and attract investment from all parts of the world. He said that investors from the emerging economies would look at this as a good opportunity as they will get a leverage money against the US bonds at a lower interest rate (sometimes the bond yiled would be higher than the loaned amount against the leaveraged bond).
Dent to dedollarisation
The Basav Capital expert said that tokenisation of the US bonds would create demand for the US Dollar, which we are witnessing in the recent dollar prints. The US administration has been printing fresh US dollars to meet the demand due to the rising US treasury yields, especially the short-term US bond yield.
“In fact the bond yield for the two-year and the thirty-year US bonds have come down by the 10 BPS, which may look small today, but slowly and steadily, it will have a big impact on the US drive for the tokenisation of the US bonds by creating a fresh demand for the US dollar,” said Sandeep Pandey.
Caliberated autonomy to the US bonds
Pointing towards the recent remarks by the US Fed Chairman Kevin Warsh, SEBI-registered market expert, Anuj Gupta said, “The US Fed Chairman has been repeatedly told in his three addresses that he wants bond investors to react to underlying changes in the US economy rather than commentary from the central bank. This is completely reverse of the set pattern till date.”
The SEBI-registered market expert said that US treasuries were completely regulated, whereas the US Central Bank is trying to give the asset class a status to reat to the US economy instead of the US Fed communications.
A key reason for Warsh’s revamp of Fed communications is what he described on Friday as a “hall-of-mirrors problem,” where financial markets react to Fed officials’ comments, and officials in turn look to markets for guidance on the economic outlook. At his July press conference, he said market participants were now “learning to play the ball, not the referee,” framing the central bank as a neutral adjudicator rather than a market mover.
“His notion from July that markets were playing the ref is clearly off-base,” said Christopher Hodge, chief US economist at Natixis. “The Fed isn’t the ref, it’s a huge player and the market movements reflect that reality.”
The moves speak to investors struggling to adapt to Warsh’s new communications style. On Friday, Warsh warned inflation isn’t meaningfully slowing and said policymakers must be confident that it is, otherwise the central bank has “work to do.” The ensuing curve-flattening move was the largest since his first press conference as chairman in June, when he emphasized his commitment to bring inflation back to target.
In July, he triggered the opposite reaction, with the curve steepening the most since August 2025. That’s after investors said he failed to articulate a rationale for the committee’s decision to keep rates unchanged.
“The chairman reaffirmed his expectation to offer less communication, underscoring the uncertainty the market will confront in anticipation of future messages,” said Alex Mackey, co-chief investment officer of fixed income for MFS Investment Management in Boston. “Events like today’s speech are ripe for bouts of volatility.”
(With inputs from Bloomberg)
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