Bond traders are testing Kevin Warsh: The Fed chair will heed—but not be ruled by—them, says an economist who spent years sitting next to him

Treasury yields are on the march with some analysts suggesting Fed chairman Kevin Warsh is being “tested” by the bond market.

But those who know the boomerang central banker well told Fortune that while Warsh will note market “teething” problems, a reaction shouldn’t be expected.

Yields have climbed higher as softer inflation and labor data have dampened the picture for Fed rate hikes, which the market has already priced in.

Thirty-year Treasuries sit near 5.3%, heights which haven’t been seen since 2007.

The 20-year is around the same mark.

Yields have been elevated since the conclusion of Warsh’s latest press conference following the meeting of the Federal Open Market Committee.

In July, markets got the impression that they were perhaps doing some of the legwork for the Fed by tightening financial conditions with higher yields.

Warsh also declined, as is his policy, to provide forward guidance, leaving analysts questioning whether the central bank would follow through with hikes.

“It is too early to draw firm conclusions, but the rise in the term premium and bear steepening of the curve following Warsh’s first two [Federal Open Market Committee] FOMC meetings could indicate that the Fed’s credibility is being tested,” said Bassam Nawfal, chief asset allocation strategist at Alpine Macro in a report yesterday.

Warsh’s defenders point out that he has been clear in his intention to bring inflation to heel at 2%.

At his first post-FOMC conference in June, Warsh stated: “I’ve said for years inflation is a choice.

You bet it is.

And today I’m announcing that this Committee, unambiguously and unanimously, have decided we are going to deliver on that.” The declaration was notable given that President Trump had insisted his nominee would have to be willing to cut the base rate.

Warsh’s credibility at the Fed is clear, Randall Kroszner, a professor of economics at the University of Chicago Booth School of Business, tells Fortune .