The bond market is doubling down on the prospect of a U.S. recession after Fed Chair Jerome Powell warned of a return to bigger interest-rate hikes to cool inflation.

Shorter-maturity notes led the jump in yields, deepening the inversion of the yield curve and pushing the two-year Treasury rate above 5% for the first time since 2007.

The bond market faces a bigger threat than recent rate hikes: the notion that rates will stay elevated even after the U.S. central bank's inflation fight is all over.

In a speech on the central bank's regulatory agenda for the year, Federal Reserve Board Gov. Michelle Bowman said the merger-and-acquisition review process could benefit from added transparency.

The duo's interactions over the next several months will have a significant impact on the economy and, by extension, their political futures.

The Federal Reserve Chair urged Congress to raise the debt ceiling, warning the impacts of not doing so could go beyond the central bank's ability to mitigate.

The Federal Open Market Committee is expected to raise rates by 25 bps at the conclusion of its meeting Wednesday, bringing its benchmark to a target range of 4.5% to 4.75%.

The current president, Esther George, is set to leave office on Jan. 31. The reserve bank's search committee has no deadline for finding a full-time successor.

Repo markets and the bank deposit business, in particular, would be upended if the U.S. were to default on its debt, experts say.

Speaking at an event hosted by the Council on Foreign Relations, Federal Reserve Gov. Christopher Waller said the Federal Reserve has a long runway for its balance sheet reduction.