The severe selling pressure hitting both Treasury bonds and the US dollar following last Wednesday’s Federal Reserve bank pause may worsen in future weeks considering that the Interactive Brokers Prediction Market on July 31 placed only a 56% chance that policymakers will hike in September. Chair Kevin Warsh has communicated an unwavering commitment to quell price pressures but hasn’t shifted policy in the two opportunities he’s had so far. His messaging has certainly tightened financial conditions; however, the fixed-income complex is now confused regarding whether the central bank has the resolve necessary to attempt the difficult and risky task of containing cost forces without slowing the economy. Indeed, economists thought the chief was the most hawkish of the voting members in Warsh’s early days at the helm, only to see that he’s more towards the middle as at least three officials, dissenters Kashkari, Logan, Hammack, are out hawking him. I believe the recent credibility hit is temporary and will be reversed at the next decision and because of that, I think the “Yes” tied to a 25-basis point increase is potentially undervalued and should be closer to $0.70.
Past performance is not indicative of future results.
Source for images: Interactive Brokers Prediction Markets.
Note: Prices are highest bids as of the morning of July 31, 2026.
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