Kevin Warsh gave his first Jackson Hole address as Fed Chair on August 28th, saying that inflation is still too high and that the Fed may have work to do, while again declining to offer forward guidance or a reaction function. The 2-year yield that would not move in June finally moved, the wrong way for the doves, jumping about 12bps to 4.36% on the speech. The 30-year sits above 5.2%, and the US to German 2-year spread is back near 150bps, almost exactly where it stood three months ago. The divergence did not close, it climbed the curve.

In June I argued that the US front end would not follow Warsh’s dovish sounding confirmation rhetoric, for three reasons: a balance sheet runoff that keeps financing conditions tight even on a softer rate path, an inflation problem that was not going away, and a deliberate reduction in forward guidance that lifts rate volatility and the premium investors demand to hold duration. Europe did the moving then, with the Schatz repricing lower on a stalling ECB while the US 2-year sat anchored near 4%. Jackson Hole was the test of that third reason.

Markets went into Friday hoping for some sketch of how the Chair reacts to data. They did not get one. Warsh restated that price stability is the job, said the summer’s softer inflation prints do not convince him that the underlying trend has improved, and suggested that investors should not be looking to the Fed for their next trade. It is consistent with his July posture, when he treated the sell-off in long yields as useful rather than troubling. It is also consistent with the position of a Chair whose committee split nine to three in July, the widest division in about two decades, and who may simply have little that he can credibly promise.

What followed was a repricing of term premium rather than of the expected policy path. The 30-year touched 5.33% earlier this month, its highest since 2007, and a long bond auction met the weakest reception in years. Nothing in that suggests dysfunction. Auctions cleared, dealers kept functioning, and investors asked to be paid more for duration in an environment where the central bank has stopped describing what comes next.

The fiscal side has taken a different view. On August 19th the Treasury said it would at least double buyback operations in the 10 to 30 year sector from September into early November, funding them with bills. Scott Bessent’s argument is that Treasury has a clearer read on market functioning than the market itself does, and that yields had moved beyond what fundamentals justified. The initial effect was a fall in the 30-year that reversed within a day, and by late August long yields sat back around their pre-announcement levels, with the first expanded operation still to come on September 9th.

That prompted a notable objection. In a Wall Street Journal op-ed on August 25th, Stanley Druckenmiller argued that buybacks were built for liquidity management and that this has become price management instead. His point was that nothing was actually malfunctioning, so there was no failure to correct, and that long yields are one of the few remaining constraints on fiscal choices. The counter is Bessent’s: heavy issuance into a thin August market can produce moves that are not informative, and smoothing them is part of managing the debt. Both readings are defensible, and the disagreement is less about mechanics than about whether an uncomfortable price is a problem or a signal.

The cross-Atlantic picture has meanwhile stayed still for new reasons. A 2-year spread near 150bps looks like continuity, but in June Europe moved while the US was pinned, and now the reverse is true, with the Bund front end held down by a stalled ECB. Europe’s long end has not been still at all, with the German 10-year reaching its highest level since 2011 in the same global repricing of duration.

The theme running through all of this is the reduced forward guidance, and its consequences are not only negative. A market that cannot anchor itself to the Fed’s next sentence has to price growth, inflation and fiscal risk on its own, and the volatility premium now visible in longer maturities is the cost of doing that work. That premium looks uncomfortable on a mark to market basis, but it also means investors are being compensated for duration risk in a way they were not for most of the past fifteen years, and that the signal in the curve reflects something other than the last statement from the podium. Whether the Treasury’s interventions leave that signal intact is the more interesting question for the autumn than whether September brings a change in rates.