The Dot Confirmed the Trade
The June 17 Federal Open Market Committee statement hit the wires with a 12-0 vote to hold the federal funds rate at 3.50 to 3.75 percent, but the median dot in the Summary of Economic Projections told the real story. The median participant now sees the policy rate at 3.875 percent at the end of 2026, up from 3.375 percent in the March projection, a half-point repricing in three months on a year that started with two cuts priced. The 10-year Treasury yield closed the FOMC week at 4.42 percent, up 18 basis points, and the term premium picked up most of the move. The dot is the trade, and the long bond is the asset absorbing the repricing.
Why Warsh’s Dot Matters More Than the Hold
Kevin Warsh was confirmed as Federal Reserve Chair on June 16 and presided over his first FOMC the next day. He chose not to submit a dot, and the statement deleted the prior language acknowledging progress on the inflation objective. That combination — silent chair, stripped dovish language, hawkish median dot — is the policy reaction function repricing the long bond has been waiting for. The term premium is now back above zero for the first time since February, and 30-year yields closed at 4.78 percent, up 22 basis points on the week. The trade is not the front end — the front end is anchored by the hold — the trade is the long end repricing for fewer cuts and a higher terminal.
What Comes Next: May PCE on June 27
The next print that locks the path is the May Personal Consumption Expenditures price index on June 27. Core PCE consensus is 0.3 percent month over month. A print at 0.4 percent or higher gives the Warsh-led committee data cover to keep the median dot at a hike through the September projection round. A print at 0.2 percent or lower migrates the dot back toward a hold and the long bond rallies 15 to 25 basis points. The trade is binary, and the next eight sessions will resolve it. Warsh begins his tenure as chair with the policy curve already priced for a hike, and his first major communication will set the tone for whether the data or the dot drives the next move.