The world's largest government bond market is watching investors flee as losses pile higher. Some investors say Federal Reserve Chairman Kevin Warsh must come to the rescue.

The 10-year Treasury note's yield was on pace to close higher for a sixth straight session Wednesday after blowing past its January 2025 peak of 4.808% overnight. Yields rise when bond prices fall. That means long-dated bonds, as measured by the iShares 20+ Year Treasury Bond exchange-traded fund, have been hammered. The ETF is down 1.5% over the past week and 7.4% since the Iran war began, on a total-return basis.

Investors want to pay less to buy longer-duration U.S. government bonds. Typically, inflation would take the blame, as higher prices lower the real value of money and the Iran war has led to a surge in oil prices. But that isn't the case now: Inflation expectations for the next decade have remained anchored, gaining just around 0.09 percentage points and contributing a fraction of the gain in the 10-year nominal yield since the Iran war started.

Rather, areas outside the Fed's control are the main culprits. Those include the wider U.S. deficit, Treasury Secretary Scott Bessent's unexpected bond market intervention last month, bets on higher short-term rates, and tough competition from corporate bond issuance.

Essentially, the Fed and Warsh, who so far have been unwilling to raise interest rates, have nothing to do with the losses in the bond market. Yet, they could be the ones to stop the bleeding.

"At this point, if he [Warsh] does not hike, I worry that it will unanchor the back-end of the curve," Brij Khurana, fixed income portfolio manager at Wellington Management, told Barron's. Back-end typically refers to Treasuries with maturities of 10 years and over.

Raising interest rates doesn't really solve what's troubling the market, "but at this point the bond market is looking for it," he wrote. The real challenge for Treasuries, in Khurana's view, is the demand for capital stemming from the artificial-intelligence boom. Hyperscalers, or companies operating large data centers, have issued $219 billion in investment-grade bonds this year, according to Bank of America. The Treasury Department issues over $230 billion in 10-, 20-, and 30-year bonds quarterly.

But the bond market still wants to see the Fed lift interest rates. A hike could restore investors' confidence that the central bank, under President Donald Trump appointee Warsh, is truly committed to fighting higher prices after five-plus years of above-target inflation,

The Fed's influence on the bond market was on full display at the annual economic policy symposium in Jackson Hole, Wyoming last week. Warsh, in his speech Friday, emphasized that officials are ready and willing to increase rates to control inflation. The 30-year yield, which had shot to its highest level in about 19 years the prior week, fell briefly during his remarks, while the 2-year yield rose. It was a sign that investors, at least in the moment, expected a rate hike and trusted the Fed to control inflation over the long run.

The Federal Open Market Committee meets for two days starting Sept. 15 to decide its next move on interest rates. Keeping rates steady at that meeting could extend the bloodbath in longer-duration Treasuries.

"Doing nothing, especially after the strong words that Warsh spoke at Jackson Hole, would most certainly cause higher yields at the long end of the curve," wrote Larry Holzenthaler, senior portfolio manager at Catalyst Funds.

Any exacerbation of the selloff will put the Nov. 1, 2023 level 4.904% for the 10-year yield in sight. For context, the 10-year yield's highest level after the pandemic was 5.019%, hit in October 2023.

Of course, the Fed wouldn't want the U.S. government to have a problem selling its debt-but it also isn't the central bank's job to manage the ups and downs of Wall Street portfolios. Policymakers care about restoring price stability and maximum employment, not the asset prices of the financial elite.

"I don't think bond yields per se will force the Fed to hike," Will Denyer, lead U.S. economist at Gavekal Research, wrote to Barron's.

"In fact, arguably a rise in long rates and a tightening of financial conditions could make the Fed less likely to hike, as the bond market is effectively doing some of the tightening for it," he added.

In Denyer's view, inflation expectations are what will make the Fed raise rates.

While the currently normal inflation expectations "do not force the Fed to hike, but they also do not rule out a pre-emptive hike aimed at making sure the Fed maintains its credibility," he wrote. "It sounds like Warsh is currently leaning in this direction."

On the surface, the Fed might say inflation is its primary consideration for a rate hike, but the bond market would feel the effect.