While the Fed move was expected, Chairman Kevin Warsh's rhetoric on inflation drove up market-implied expectations for at least one more increase this year and as many as two more in 2027.
Economists in a recent Bloomberg survey expected policymakers to hold their outlooks for unemployment and inflation largely unchanged.
There has been a stark change in regime when 10-year yields go much above 5.25%. After that point, the risks to bond volatility and hence stock vol and credit spreads markedly increase.
nterest-rate swaps showed traders ramped up bets on higher benchmark rates in the months ahead, with sticky price pressures seen pushing policymakers led by Fed Chairman Kevin Warsh to act.
Thursday's purchases were under increased scrutiny as the first since Bessent unexpectedly announced that the department would "at least double" the size of operations previously penciled in at $2 billion.
Palmer Square engaged bankers who have been fielding offers and whittling down a list of potential bidders.
Some investors have looked to buy only shorter-term commercial paper from Guggenheim, while a smaller portion of backers have paused trading the firm's products
Credit premiums remain subdued and downside protection across risky assets is still relatively cheap. Even the strain in market plumbing has been concentrated.
Waller said he was "willing to support holding the policy rate at its current level" if inflation continued moving toward the Fed's 2% target.
Any failure to follow Bessent's barely camouflaged calls to raise interest rates would now not only surprise traders who fully expect a move, but also send the yen tumbling.
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