Goldman Sees More Two-Year Volatility Under Warsh Fed

• The Fed's recent meeting was unambiguously hawkish, prioritizing inflation in the short term and adopting a data-dependent approach for future decisions.
• Expect increased volatility in the 2-year Treasury sector due to less forward guidance and a focus on incoming inflation data.
• A potential 'Warsh Fed' could lead to reduced long-end volatility through re-examination of the Fed's operating model and balance sheet management, making Treasuries more attractive.

Kay Haigh of Goldman Sachs Asset Management discusses the Fed's hawkish stance and its implications for bond markets. He anticipates increased volatility in the 2-year Treasury sector due to a data-dependent approach and less forward guidance. While a potential 'Warsh Fed' could reduce long-end volatility, making Treasuries more attractive, the overall market remains sensitive to inflation and balance sheet adjustments.