SocGen Says 'Unhinged' Yields Pose Early Test for Warsh

• US economy remains resilient despite higher inflation, but bond yields are becoming 'unhinged' due to concerns about debt and deficits.
• The Fed needs to change its policy bias from easing to neutral and be ready to hike rates if inflation expectations get unhinged.
• Higher oil prices and the prolonged war in Ukraine are contributing to inflationary pressures and fiscal challenges.
• Growing US debt and deficits are an 'under-discussed topic' that will lead to higher debt financing costs if not addressed by policy.

Subadra Rajappa of Societe Generale Americas warns that 'unhinged' Treasury yields pose an early test for the Federal Reserve, emphasizing the need for the Fed to shift its policy bias from easing to neutral and be prepared to hike rates. She highlights concerns about persistent inflation expectations and growing US debt and deficits, exacerbated by high oil prices and geopolitical conflict, which will lead to higher debt financing costs.