Gold, Bitcoin Sink as Warsh Lifts September Fed Hike Odds to 60% - State Street SPDR S&P 500 ETF Trust (A

In his first symposium keynote as Fed Chair, Kevin Warsh said summer’s softer inflation prints failed to convince him that underlying trends have improved.

Policymakers must be confident inflation is returning to 2% “clearly and at sufficient speed,” he warned. “Otherwise, we have work to do.”

He refused to call that forward guidance. The rates market called it for him.

Odds of a quarter-point hike at the Sept. 15–16 meeting jumped to 59.7% by late morning, up from 35.4% Thursday and 39.9% last week, according to CME Group’s FedWatch tool.

The two-year Treasury yield rose 9 basis points to 4.32%, a one-month high.

The real signal, however, lies in the yield curve rather than the front end.

While the two-year spiked, the 30-year yield held flat at 5.19% and the 10-year rose less than 4 basis points to 4.71%. That classic bear flattener shows traders pricing in short-term Fed tightening—and betting it will successfully keep long-term inflation in check.

Traders believe Warsh will hike, and that the hikes will work. That is why equities escaped the damage.

Bitcoin, Gold Sink

The S&P 500 traded near 7,724, down 0.09%, the Nasdaq 100 slipped 0.24%. The dollar index rose 0.4% to 99.57.

The pain concentrated in the two positions that had run hardest into the speech.