Bond traders are closely watching this week's personal spending data after Federal Reserve Chairman Kevin Warsh's recent comments on restoring price stability prompted a shift toward a more hawkish stance. Short-term Treasury yields surged last week as traders priced in a potential rate hike in 2026, following Warsh's first press conference.

The S&P 500 is approaching new records because of rising corporate earnings, solid economic data and falling oil prices, but investors are wary. Risks include stretched valuations, potential interest-rate increases by the Federal Reserve and the sustainability of artificial-intelligence-driven growth. Net equity issuance has also increased, raising concerns about market stability.

Investors have warned that Federal Reserve Chair Kevin Warsh's move to strip back forward guidance could increase Treasury volatility and push US borrowing costs higher by forcing markets to price more uncertainty. Warsh declined to submit his own dot plot and signaled further changes to Fed communications, a shift that may raise risk premia while giving traders less advance warning on future rate moves.