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[Bond Market Plight May Be a Consideration for the Fed, But Intervention Unlikely] ⑴ Soaring US government bond yields are pushing up credit costs across the US, potentially becoming a factor in the Fed's monetary policy discussions. However, analysts believe the central bank will resist any explicit calls from the Trump administration to bail out the market. ⑵ Treasury Secretary Bessant has taken an unusually proactive role in trying to lower yields he considers inconsistent with the US economic outlook, including expanding a key debt repurchase operation last week. ⑶ However, this effort is faltering, with the 10-year US Treasury yield rising above 5%, its highest level since 2007. Bessant attributed this to "global problems" when he arrived at Congress for a hearing on Tuesday. ⑷ The bond market slump raises questions: Could the Fed be asked to buy government debt to reduce supply, thereby limiting or lowering yields and easing borrowing costs for the government and private sector? ⑸ Fed watchers believe this prospect is slim unless the market is in distress, and despite continued price declines, there is currently little evidence of distress. ⑹ Comments by Fed Chairman Warsh suggest a willingness to coordinate with the Treasury on certain issues, perpetuating these concerns. (7) BlackRock's chief bond investment manager stated that financial conditions are one of the Federal Reserve's unwritten responsibilities, and policymakers must consider this factor when influencing debt costs by adjusting short-term interest rates. (8) The Federal Reserve is expected to conclude its two-day meeting on Wednesday, raising the policy rate by 25 basis points to 3.75% to 4.00% due to recent high inflation data. (9) Market participants believe this will benefit the Treasury, as it will enhance the Fed's credibility in combating inflation, and long-term yields should decline over time. (10) A Deutsche Bank investor survey released Monday showed that investors believe a rate hike now might slightly increase yields in the short term, but long-term yields will rise more if the Fed keeps rates unchanged. (11) Most analysts agree that it is not feasible for central bank officials for the Treasury to push for large-scale intervention by the Fed to limit yields. 12 Some economists have pointed out that Warsh is very concerned about the credibility of the Federal Reserve and himself. The Treasury has already damaged its credibility due to its market intervention. The leadership of the Federal Reserve has no intention of getting involved. For the Federal Reserve, the stakes are even greater than those of the Treasury.