Federal Reserve Chairman Kevin Warsh feels the bond market is telling a story about growth, inflation, and fiscal sustainability risks that he needs to "interrogate."

Treasury Secretary Scott Bessent thinks bond traders are working off "bad information" that "doesn't reflect the underlying fundamentals."

Warsh responded to what he heard from the market, and lifted U.S. interest rates this week despite pressure from President Donald Trump and the optics of a midterm election less than 50 days away.

Bessent, meanwhile, executed a series of maneuvers to tamp down yields and restore order to the bond market.

And now the two are at odds over how to manage the world's most important interest rate, which is just a tick or two away from the highest since 2007, as the stock market slows, and investors grow cautious, into the final months of the year.

"Warsh wants to learn more from market signals, while Bessent seeks to influence the prices that generate those signals," said Bank of America's global economist Claudio Irigoyen. "But by impairing price discovery, one policy risks undermining the information the other is trying to extract."

Benchmark 10-year note yields, which Warsh described Wednesday as "the most important asset anywhere in the world," have powered notably higher over the summer, and reached a 2007 high of around 5.04% earlier this week.

The 10-year-note, which determines both the "risk free" interest rate used to price assets in virtually every market around the globe and drives the pricing of a host of U.S. consumer lending products, was still trading near the 5% level Thursday and threatens to lean on stock performance into the end of the year and beyond.

Warsh, in leading the Fed's first interest rate hike in three years, seems willing to accept the bond market's assessment of growth and inflation. But he added that other factors, including the competition for capital from the AI investment race and the geopolitical tensions stemming from "hot spots" around the world, are also driving yields higher.

"The Fed has an enormous amount of power," Warsh said. "But getting the understanding right between financial markets and the Fed is a balance that I've long thought could be better struck."

Bessent seems less inclined to accept the market's day-t0-day assessments.

"I am the house now," he declared last month as the Treasury moved to support a long and worrying decline in the yen, which threatened further upheaval in the bond market as investors worried that Japan, the world's largest foreign holder of U.S. debt, would dump Treasuries to raise money and support their currency.

"If some of the Bloomberg Terminal bros are unhappy with what I'm doing, well, that's too bad," he told Steve Bannon last week. "The Treasury market is in very good shape."

What he's doing, of course, is using Treasury funds to buy longer dated bonds, in an effort to tamp down yields that were rising with concerning speed over the late summer.

He's also talked about game-changing sanctions on Iran that will lower global crude prices and dismissed market grumbling at his intervention tactics as a "bunch of noise."

"In my career, I've made money ignoring the noise," he added.

Warsh seems to suggest the bond market's moves are more signal than noise, however, and that could put the two squarely at odds over the coming months and investors place wagers on inflation pressures, broader growth prospects, and fiscal responsibility that will determine the state of market interest rates.

"Inflation remains high, as does the fiscal deficit, as is wider [bond market] issuance," said James Knightley, ING's U.S.-based economist. "And the AI productivity-driven narrative remains in place."

He sees the 10-year yield level rising north of 5% in the coming days, with a 5.5% level deemed "perfectly attainable in light of the still quite loud mood music that has been driving the long-end."

The question now, it seems, is how the Warsh and Bessent will react to the expected rise.

Fed watchers see at least one more rate hike between now and the end of the year, with as many as two more increases priced in for 2027. Whether those will be led by the bond market, or determined by data that then stokes yields in that direction, remains to be seen.

If Warsh's view that "trends matter" but "data points are noisy" is right, it may take the markets some time to find their way. But they will.

Soaring crude prices, which have risen nearly 50% since the start of July, will be a factor, as will the relentless rise in domestic energy prices, including record high costs for diesel fuel and a 38% year over year gain for a gallon of gas.

How that sits with Bessent is another matter entirely.

"I'm not saying 'I am always right; don't challenge me,'" he told Bannon's podcast last week. "But I am trying to say I have superior information and that I am trying to give the market good framing so that they don't panic."

"They want it set up like Scott Bessent versus Kevin Warsh," Bessent told Bannon's podcast, calling such a clash "rubbish."

"Kevin and I have known each other for 20 years," he said. To think that I don't know what the chair of the Fed's thinking is absurd."

What either thinks, it seems, runs secondary to what the bond market is actually saying. And right now, it's speaking rather loudly.