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Bank of America strategists led by Michael Hartnett are framing Fed Chair Kevin Warsh’s upcoming Jackson Hole keynote as a binary event for the Treasury market. Get it right, and the yield curve flattens in a way that supports risk assets and strengthens the dollar. Get it wrong, and yields could blow past levels not seen since before Treasury Secretary Scott Bessent’s buyback communications earlier this month.
The assessment, issued on August 28, lands at a moment when the bond market is already running hot. The 30-year Treasury yield has climbed to 5.34%, a watermark not touched since 2007. US national debt has crossed the $40 trillion threshold. And inflation, as measured by July’s CPI print, sits at 3.4%, still well north of the Fed’s 2% target.
The two scenarios BofA is watching
The strategists laid out a clean framework for thinking about Friday’s speech, scheduled for around 10 a.m. ET. They call the optimistic path a “bull success” scenario: Warsh delivers a balanced message that keeps short-term yields contained while providing enough hawkish credibility to anchor long-term yields. The result would be a flatter curve, which historically tends to create a friendlier environment for equities and other risk assets.
The darker scenario is what BofA labels a “policy failure.” In this version, Warsh either comes across as too ambiguous on inflation or fails to project coordination between the Fed and Treasury. That could steepen or outright lift the yield curve, sending borrowing costs higher across the board.
The asymmetry here matters. In a mid-August BofA fund manager survey, 69% of respondents said they expected a neutral tone from Warsh. That means the market has already positioned for a non-event. If Warsh delivers exactly what’s expected, the reaction could be muted. But any deviation, in either direction, carries outsized potential to move markets precisely because so many investors are sitting in the same neutral camp.
Warsh’s communication style adds uncertainty
Since taking office on May 22, 2026, Warsh has made a deliberate choice to strip away forward guidance. Warsh has signaled he plans to address “big questions” rather than offer near-term rate signals.
The reduced guidance has already contributed to market volatility since Warsh’s tenure began. Persistent inflation above 3% combined with a national debt load that keeps growing has created a backdrop where long-term yields are under genuine upward pressure.
The Jackson Hole symposium, running from August 27 to 29, carries the theme “Financial Innovation: Implications for Payments and Policy.”
Why the yield curve matters right now
The coordination between Warsh and Treasury Secretary Bessent is a subplot worth watching. Bessent’s buyback communications earlier in August were designed to manage long-term borrowing costs by adjusting the composition of Treasury issuance. BofA’s strategists are essentially arguing that Warsh needs to complement that effort by reinforcing the Fed’s inflation-fighting credibility. If the two messages align, it creates a coherent policy narrative. If they don’t, the market will notice.
With 69% of fund managers already positioned for a neutral outcome, the market is essentially betting that Warsh will thread the needle. With inflation running 70% above target and the national debt exceeding $40 trillion, BofA’s note highlights the difficulty of that task.
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