Apollo's Slok Says Warsh Silence Fuels Treasury Selloff

Summary

Torsten Slok, Apollo's chief economist, argues that the Fed's decision under Chair Warsh to abandon forward guidance is fueling a selloff in long-end Treasuries and tightening financial conditions. He highlights the 30-year Treasury yield approaching the critical 5.20% level as a key signal; a break above would indicate a credibility crisis that may force the Fed to hike at the next meeting.

• Lack of Fed forward guidance increases market uncertainty and volatility.
• 30-year Treasury yield is selling off, tightening financial conditions.
• Key level to watch is 5.20% on the 30-year yield, a potential trigger for further bond selloff.
• Market reaction signals a challenge to Fed credibility and raises probability of a September rate hike.
• If the Fed fails to hike, long-end yields could rise further as hawkish talk is tested.
• A rate hike may eventually restore credibility and bring long yields down.