Bond investors reportedly told the Treasury they were uneasy about Kevin Hassett becoming Fed chair, warning he might favor sharp rate cuts.
- Investors warned the Treasury that Kevin Hassett could favor sharp rate cuts if named Fed chair.
- Treasury sought feedback from major banks and asset managers ahead of Powell’s 2026 succession.
- Market participants questioned Hassett’s independence and flagged inflation and bond-market risks.
Bond investors have reportedly told the U.S. Treasury they are concerned about Kevin Hassett’s possible appointment as Federal Reserve chair, warning he could push for aggressive interest-rate cuts aligned with U.S. President Donald Trump.
Treasury Sought Views Privately
The Treasury gathered feedback on Hassett and other candidates in one-on-one calls with senior figures at major Wall Street banks, large asset managers and other influential debt-market participants, Financial Times reported, citing people familiar with the matter.
The discussions supposedly took place in November before Treasury Secretary Scott Bessent held a second round of interviews with contenders to replace Fed Chair Jay Powell when his term ends in May 2026. However, a White House spokesperson said Trump would nominate the most qualified candidates and that any discussion before an announcement amounts to “pointless speculation,” according to the report.
Hassett Emerges As Frontrunner
Hassett, the White House’s top economic official, has moved to the front of the field as Trump and Bessent narrowed an initial list of 11 names. Trump on Tuesday said he expected to announce his pick “early” next year and called Hassett a “potential” contender.
A few bond investors said they preferred BlackRock’s Rick Rieder or Fed governor Christopher Waller, whom they viewed as more independent from Trump. Some of the investors contacted were members of the Treasury Borrowing Advisory Committee, which advises Bessent on market issues, the report said. When Hassett met TBAC earlier this year, he spent little time discussing markets, instead highlighting administration priorities, including issues relating to Mexican drug cartels, the report said.
Fears Of Rapid Cuts If Inflation Persists
Investors contacted by the Treasury voiced worries that Hassett, seen as closely aligned with Trump’s preference for sharply lower borrowing costs, could push for rate cuts even if inflation remains above the Fed’s 2% target. One person said “no one wants to get Truss-ed,” referring to the 2022 UK bond rout after then-Prime Minister Liz Truss announced unfunded tax cuts, Financial Times reported.
Some market participants said a dovish Fed chair could spark selling in long-dated Treasuries if inflation rises next year. Others questioned whether Hassett could corral consensus on a divided Fed board, Financial Times noted.
Stocktwits Traders Show Strong Support For Hassett
On Stocktwits, retail sentiment for the SPDR S&P 500 ETF (SPY) and the Invesco QQQ Trust (QQQ) was ‘bearish’, with message volume ‘normal’ for SPY and ‘low’ for QQQ, while the SPDR Dow Jones Industrial Average ETF (DIA) saw ‘bullish’ sentiment amid ‘low’ message volume.
Meanwhile, a Stocktwits poll showed Kevin Hassett leading with 55% support as nearly 12,400 respondents weighed who they expect Trump to name as the next Federal Reserve chair. Fed governor Chris Waller drew 12%, former Fed governor Kevin Warsh had 7%, and 26% said the choice should remain “too late Powell.”
SPY and QQQ are up 18% and 22% respectively, so far this year, while DIA gained 14%.
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