--- title: "The More the Fed \"Panics,\" the More Stable US Treasuries Become? BofA's Hartnett: Warsh May Be Forced to Hike Rates to Curb Soaring Long-Term Yields" type: "News" locale: "en" url: "https://longbridge.com/en/news/293775012.md" description: "The real yield on US 30-year Treasury bonds has risen to 3%, hitting a new high since the 2008 financial crisis. Michael Hartnett, Chief Strategist at Bank of America, believes that Kevin Warsh, the new Federal Reserve Chair, may need to proactively raise interest rates to stabilize the long end of the yield curve. He recommends investors shift towards defensive sectors and long-duration assets, while avoiding bank, technology, and industrial stocks" datetime: "2026-07-24T15:23:47.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/293775012.md) - [en](https://longbridge.com/en/news/293775012.md) - [zh-HK](https://longbridge.com/zh-HK/news/293775012.md) --- # The More the Fed "Panics," the More Stable US Treasuries Become? BofA's Hartnett: Warsh May Be Forced to Hike Rates to Curb Soaring Long-Term Yields As yields on US long-term bonds continue to climb, putting pressure on the bond market, Bank of America's chief strategist suggests that a "panic-induced rate hike" might be the exact remedy the bond market needs. The real yield on US 30-year Treasury bonds has risen to 3%, the highest level since the global financial crisis in November 2008. In his latest strategy report, Michael Hartnett, Chief Investment Strategist at Bank of America, pointed out that Kevin Warsh, the new Federal Reserve Chair, may need to raise interest rates to stabilize the long end of the yield curve. Currently, the market expects a 38% probability of a rate hike at the next Federal Reserve meeting, and expectations for a hike at the September 16 meeting have been fully priced in. However, this outlook faces political constraints. Hartnett noted that a key variable remains whether the Trump administration, which he described as "stock-market friendly," would be willing to tolerate a rate hike that acts as a "brake" on the stock market before the midterm elections in November. Tightening financial conditions are already underway—23 central banks globally have raised rates so far this year, and Bank of America expects another 18 hikes before year-end. Meanwhile, the continued expansion of AI capital expenditure is turning cash flows negative for many S&P 500 constituents, implying that the scale of future stock buybacks will shrink accordingly. Hartnett currently recommends investors shift towards Defensive Stock sectors and long-duration assets, while avoiding bank, technology, and industrial stocks. ## **Real Yields on Long-Term Bonds Hit 16-Year Highs as Pressure on Bond Market Mounts** The rise in the real yield on US 30-year Treasury bonds to 3% is not only a direct reflection of tightening financial conditions but also poses systemic pressure on the valuation of risk assets. Hartnett believes that for the market to shift its focus from the negative impacts of tightening financial conditions to the positive factors of earnings growth, the Federal Reserve under Warsh's leadership may need to take action by raising rates. Warsh has previously abandoned the Fed's forward guidance. Hartnett pointed out that the current inflation environment does not support holding steady: the annual growth rate of the Consumer Price Index (CPI) remains in the 3% to 4% range, and there are no signs of AI impact on the labor market. ## **Political Pressure Becomes the Biggest Constraint on Rate Hikes as Tightening Financial Conditions Are Already a Fact** Hartnett stated bluntly that regardless of consultations between Warsh and the government, the trend of tightening financial conditions cannot be avoided. So far this year, global central banks have completed 23 rate hikes, and Bank of America expects another 18 before the end of the year. Against this backdrop, the probability that Warsh will be forced to respond to pressure from the bond market is rising, although a "stock-market friendly" policy orientation may complicate the timing of rate hikes. Current market pricing shows a 38% probability of a rate hike at the next Federal Reserve meeting, but this has been fully priced in before the September 16 meeting. This distribution of expectations reflects the internal contradictions in the market regarding the policy path—concerns about persistent inflation and rising yields coexist with fears that policy tightening will shock the stock market. ## **Pattern of Rising Yields and Bank Stocks May Reverse, Triggering Deleveraging of Risk Assets** Hartnett pointed out that the market has recently seen a pattern of rising bond yields alongside gains in bank stocks, but he warned that this relationship could reverse—meaning high yields could instead depress bank stocks, triggering a broader wave of deleveraging in risk assets. In this regard, he believes the US dollar is the best hedging tool. Theoretically, higher interest rates will widen the yield differential between the US and other markets, attracting capital inflows into US Treasuries and supporting a stronger dollar. Semiconductor stocks have fallen more than 20% from their June highs. Hartnett views "blue-collar" semiconductor companies such as Texas Instruments, Analog Devices, NXP, Microchip, ON Semiconductor, and STMicroelectronics as leading indicators of the industrial cycle—specifically, barometers of the AI industry cycle. Based on these judgments, Hartnett and his team, including Jessica Guo, Anya Shelekhin, and Myung-Jee Jung, recommend increasing exposure to defensive sectors, dividend assets, and long-duration bonds, while underweighting banks, brokerages, technology, and industrial sectors. ### Related Stocks - [BAC.US](https://longbridge.com/en/quote/BAC.US.md) - [.SPX.US](https://longbridge.com/en/quote/.SPX.US.md) - [TXN.US](https://longbridge.com/en/quote/TXN.US.md) - [ADI.US](https://longbridge.com/en/quote/ADI.US.md) - [NXPI.US](https://longbridge.com/en/quote/NXPI.US.md) - [MCHP.US](https://longbridge.com/en/quote/MCHP.US.md) - [ON.US](https://longbridge.com/en/quote/ON.US.md) - [STM.US](https://longbridge.com/en/quote/STM.US.md) - [BAC-Q.US](https://longbridge.com/en/quote/BAC-Q.US.md) - [BML-L.US](https://longbridge.com/en/quote/BML-L.US.md) - [BAC-L.US](https://longbridge.com/en/quote/BAC-L.US.md) - [BAC-K.US](https://longbridge.com/en/quote/BAC-K.US.md) - [BML-H.US](https://longbridge.com/en/quote/BML-H.US.md) - [BAC-N.US](https://longbridge.com/en/quote/BAC-N.US.md) - [BAC-E.US](https://longbridge.com/en/quote/BAC-E.US.md) - [MER-K.US](https://longbridge.com/en/quote/MER-K.US.md) - [BAC-O.US](https://longbridge.com/en/quote/BAC-O.US.md) - [BML-G.US](https://longbridge.com/en/quote/BML-G.US.md) - [BAC-M.US](https://longbridge.com/en/quote/BAC-M.US.md) - [BAC-B.US](https://longbridge.com/en/quote/BAC-B.US.md) - [BML-J.US](https://longbridge.com/en/quote/BML-J.US.md) - [BAC-S.US](https://longbridge.com/en/quote/BAC-S.US.md) - [BAC-P.US](https://longbridge.com/en/quote/BAC-P.US.md) - [8648.JP](https://longbridge.com/en/quote/8648.JP.md) - [MCHPP.US](https://longbridge.com/en/quote/MCHPP.US.md) - [STMEF.US](https://longbridge.com/en/quote/STMEF.US.md) ## Related News & Research - [Short-term offers yield 4%+, expert says](https://longbridge.com/en/news/294566678.md) - [Government Bonds Now Have An Inconvenience Yield](https://longbridge.com/en/news/294543296.md) - [2-Year Treasury Yield Falls to 4.235% — Data Talk](https://longbridge.com/en/news/294252490.md) - [US Treasury yields soar as market struggles to interpret Fed](https://longbridge.com/en/news/294339648.md) - [Bond market is calling Warsh’s bluff on inflation fight as yields surge](https://longbridge.com/en/news/294267558.md)