The US Treasury yield curve underwent a pronounced flattening after Federal Reserve Chair Warsh delivered hawkish comments in his prepared remarks at the Jackson Hole symposium. This market movement saw short-term Treasury yields climb, while yields on longer-dated government debt edged slightly lower.

The 2-year Treasury yield rose as much as 5 basis points to 4.28%, reaching its highest level since July 31st. Concurrently, Overnight Indexed Swap (OIS) contracts tied to Federal Reserve meeting dates reflected a modest increase in the probability of rate hikes this year.

Swap market pricing now implies approximately 12 basis points of tightening for the next rate decision scheduled for September 16th, which represents roughly half of a standard 25-basis-point move. This compares to the approximately 10 basis points that markets had priced in prior to Warsh's speech. Additionally, futures markets are currently pricing in around 33 basis points of cumulative tightening by the end of the year.

Notably, Warsh indicated that inflation has not shown signs of slowing and reiterated his commitment to achieving the Fed's 2% target.