Federal Reserve Chair Kevin Warsh looks on during his first news conference since taking the helm at the central bank on June 17, 2026 in Washington, DC.
Chip Somodevilla | Getty Images
It could have been a big week for bond bears, if it weren’t for crude oil.
US GDP came in above expectations and the Fed’s preferred inflation gauge printed the highest reading since October 2023. Yet U.S. Treasuries held firm as the 10-year yield fell to under 4.4% and the iShares long term bond ETF (TLT) added two-thirds of a percent, extending a 5% gain since its low last month.
One explanation is that a steep drop in oil prices – crude futures fell about $10 from last Friday’s high – is reducing the risk of higher inflation and a hawkish central bank.
“It definitely looks bearish and the curve has flattened out a little bit,” Phil Streible, chief market strategist at Blue Line Futures, said in a phone call. “I don’t see oil in the 50s but it could get comfortable in the 60-65 range.”
Judging by options flows around the oil ETF (USO), further relief might be on the way. About 30% more puts traded than calls Friday, with put-selling the least popular directional trade, according to ThinkOrSwim data. Of the $114 million premium traded in the fund, $81 million was tied to calls, SpotGamma data show.
If oil prices stay subdued, it could lower the specter of a hawkish Fed now under the leadership of Kevin Warsh, who told reporters earlier this month the central bank would spend more time developing internal task forces than speculating publicly on the direction of interest rates.
iShares 20+ Year Treasury Bond ETF (TLT), YTD
More puts traded than calls in the TLT ETF Friday, but put-selling was the most common trade by volume. One of the biggest trades of the day was the simultaneous sale of both 11,000 80-strike puts, and 44,000 55-strike puts, a trade that brought in about $2.6 million. Of the $51 million traded in TLT, $30 million was tied to puts.
“We probably saw the peak in CPI inflation and when Warsh sees inflation come down I’d think they go from hawkish to neutral, or maybe dovish,” said Streible.
