And I thought I was a harsh critic.

In the wake of Kevin Warsh’s botched press conference on July 29, I suggested market commentators check their politics at the door before trying to explain away the reaction in US rates, where a dramatic twist-steepener indicted the new Fed chair for gross ineptitude.

Sitting here on August 1, I’m left wondering if I attacked a straw man. Because my goodness: Some of the market color penned over the past 48 hours makes my Warsh criticism seem tame. Meek, even. Apparently, no one’s letting their political biases prevent them from lampooning Warsh, and in acerbic terms.

Take Karl Schamotta, whose “X” feed I must admit is pretty damn funny, high praise coming from a man (me) who thinks engaging on social media is a hallmark of hopeless immaturity. Following this week’s press conference, Schamotta joked that although he “couldn’t possibly comment” on such a crude characterization, some investors might demand a “moron risk premium” going forward to insure them against a scenario where Warsh falls behind in the inflation fight.

Tough crowd! But, as discussed in the latest Weekly, not as tough as the bond market, which delivered to Warsh the worst of all possible rebukes: A meaningful bear steepener.

The MOVE, it’s worth noting, is the highest in more than 10 weeks, as shown above in red.

In the weekend article where I found Schamotta’s “moron premium” quip, Bloomberg’s Geoffrey Morgan and Natalia Kniazhevich alluded to what I’ll describe, perhaps hyperbolically, as another major risk associated with Warsh’s determination to eschew forward guidance: Bond yields are a de facto “macro” fundamental, so when they move sharply higher over a compressed time frame, it can act as a macro shock. Macro shocks, in turn, tend to push up correlations.

Right now we’re in earnings season. The associated return dispersion — as investors price divergent corporate fortunes — helps keep a lid on correlation which, as most readers are well aware, has never been lower. But a Fed that stokes rates vol as a matter of course, is a Fed that risks being a source of “Corr 1” shocks, which could be especially disruptive for a very crowded dispersion trade.

The figure above’s a reminder of the extent to which acute correlation shocks tend to be a product of macro events during periods of calm monetary policy.

Warsh is setting up a scenario in which policy (and thereby rates) isn’t really “calm.” This week, the result was a “moron steepener,” if you will. Here’s hoping that particular move on the curve doesn’t extend into August, when liquidity’s thin.

Since March, crude’s been “the straw that stirs the drink” in rates, as Nomura’s Charlie McElligott put it a few days ago, prior the July FOMC meeting. With the Pentagon reportedly set to deliver a new wave of attacks against Iran, the last thing markets needed was for the rates drink to get another straw, in Warsh.

As the figure above, from McElligott, reminds you, “All assets are short rate vol.” Warsh can’t do much about oil prices, but he can reduce or, ideally, eliminate, the inflation tail. Indeed, that’s his whole job. This week, he made it fatter instead with his obfuscatory press conference.

This has the potential to get dicey at the front-end too. If markets start to suspect — for example, in response to something Warsh says at Jackson Hole — that the Fed will resort to upsized hikes in a bid to close the gap between EFFR and twos, Warsh could end up with volatile STIRs, particularly if his colleagues aren’t “allowed” to wink at markets between meetings.

Consider the figure below, from BMO’s Ian Lyngen. It shows the absolute value of the rates “surprise” versus the market-implied rate the day before policy meetings. Say, for example, a given meeting’s priced at +23bps, a virtual lock for a hike, and the Fed delivers that hike. That’d be a 2bps “surprise.”

“While the Fed delivered on the official consensus for a hold at the July 29 meeting, it was the third-biggest FOMC surprise of the last decade given that the futures market was pricing in 7.9bps of tightening,” Lyngen noted. If the Fed had instead hiked, the resulting 17bps “surprise” would’ve been the largest in recent memory.

The takeaway is that Warsh was guaranteed this week to deliver one of, and maybe the, biggest “surprises” versus Fed funds futures of the last decade no matter what he did — i.e., hold or hike. Imagine how chancy that setup would get in the event Warsh decides to reduce the number of policy meetings the Fed holds, as suggested by The New York Times.

To be sure, all this hand-wringing and speculation about worst-case scenarios is premature. And if you’re inclined to suggest I’ve submitted ol’ Kevin to too much in the way of verbose derision since Wednesday, I won’t argue. But hey, at least I didn’t call him a moron.