Markets were caught off guard as reports surfaced that Kevin Hassett — widely seen as a “dovish ace” — was suddenly blocked from Fed chair consideration by Trump. The reaction was immediate and violent. U.S. Treasuries sold off hard, pushing the 10-year yield to 4.23%, its highest level since last September.
At first glance, this move confused many traders. If a dovish candidate is sidelined, shouldn’t yields fall? Instead, the opposite happened — and the reason lies in who stepped into the spotlight.
All eyes turned to former Fed Governor Christopher Waller, whose nomination odds reportedly surged toward 60%. Waller is known as a policy hawk, someone who previously supported rate hikes even during fragile economic periods. That shift alone was enough to force a full repricing of rate expectations.
Trump’s comment that Hassett is “too important” to lose — keeping him inside the White House — only fueled speculation further. Betting markets like Polymarket lit up, and traders were left asking a brutal question: are rate cuts slipping out of reach?
Some analysts argue Waller could talk dovish in the short term, but with the U.S. economy still running hot, policy reality may demand toughness. That means the bond market calm we’ve seen could be ending — and fast.
What makes this even more dangerous is the silence before the storm. The MOVE Index, a key measure of bond volatility, just hit a four-year low. Historically, that kind of complacency doesn’t last. Add in an upcoming Supreme Court ruling on IEEPA tariffs and growing uncertainty around executive power, and the pressure builds quietly beneath the surface.
The Fed leadership race is no longer a background story — it’s becoming the center of gravity for global markets. Will the next chair cut rates to stabilize the system, or tighten into strength and risk breaking something?
The bond market has started answering that question already.
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