Warsh Fed Chair Alters Yield Curve; AA 30-Year Bonds Mispriced

Kevin Warsh became Federal Reserve chair in June after being appointed by President Trump. He removed the Fed’s dot plot and shifted the policy approach to rely more on incoming economic data rather than forward guidance. Jason Greenblath, director of corporate credit research at American Century Investments, noted markets initially reacted positively and that the change has reshaped the yield curve and could increase yield volatility by making future rate paths less clear.

Corporate credit spreads remain unusually tight and are near historical lows on a roughly 30-year measure. Greenblath identified the largest mispricing in AA-rated 10- and 30-year corporate bonds, with the distortion most pronounced in 30-year AA debt. He said those long-dated AA bonds offer entry points for active managers that can be selective.

Large technology issuers, often called hyperscalers, have driven much of the recent spread action. Greenblath pointed to a retracement in spreads for those issuers after events including the start of U.S.-Israel-Iran clashes in March and Liberation Day. Several hyperscalers carry AA ratings and plan sizable issuance; Greenblath estimated potential deals in the roughly $25 billion range and said more supply could arrive over the next two years.

Event risk is the primary downside for corporate bonds. Comcast announced a split into two companies and was placed under review for a possible downgrade by rating agencies. At current tight spreads, investors are exposed if corporate events reduce cash flow or weaken credit profiles.

Active strategies can adjust holdings and issuer selection in response to event-driven risks. American Century’s Diversified Corporate Bond ETF, KORP, is an active corporate bond fund and charges a 29-basis-point fee. Greenblath said investors who missed recent primary offerings may see additional opportunities in coming quarters or in 2027 as new issuance arrives.