According to Financial Times News, bond investors have privately warned the US Treasury they are concerned about Kevin Hassett’s potential appointment as Federal Reserve chair, fearing he would cut interest rates aggressively to please President Donald Trump. The Treasury solicited this feedback in one-on-one conversations in November with executives from major Wall Street banks and asset managers, before Secretary Scott Bessent held a second round of interviews for candidates to replace Jay Powell in May 2026. Hassett, the White House’s top economic official, has emerged as a frontrunner from an initial list of 11 contenders. Trump said he plans to name his pick early next year and signaled Hassett is a “potential” contender, a comment that briefly caused the US dollar to slip. Investors specifically worry Hassett could push for rate cuts even if inflation, which was 2.7% in August, remains above the Fed’s 2% target.
Market Fears a Political Fed
Here’s the thing: the bond market’s biggest nightmare is a loss of central bank independence. And that’s exactly what they see in Hassett. The report says some senior participants would have preferred candidates like BlackRock’s Rick Rieder or Fed governor Christopher Waller, who are seen as more independent. The fear isn’t necessarily that Hassett is unqualified—former colleagues call him smart and capable—but that “Kevin Hassett the independent economist” gets overruled by “Kevin Hassett the active participant in the Trump administration.” One investor bluntly called him a “Trump stooge.” When your biggest customers are using phrases like that, you should probably listen.
The Specter of Getting “Truss-ed”
That quote from a market participant says it all: “No one wants to get Truss-ed.” They’re referring, of course, to the UK bond market meltdown in 2022 after then-PM Liz Truss proposed unfunded tax cuts. The parallel here is the fear of policy driven by political ideology rather than economic data. Investors are picturing a worst-case scenario where a dovish, Trump-aligned Fed chair keeps policy loose while inflation reignites. That combination could “ignite a sell-off in long-term Treasuries.” Basically, they think Hassett might prioritize the political cycle (and Trump’s demands for lower rates) over the economic cycle. Can you blame them for being skeptical?
A Question of Credibility and Control
There’s another layer to this, too. Some investors doubt whether Hassett could even manage the Fed’s board. It’s a divided group, and corralling consensus on rate decisions requires deep institutional respect and political skill within the building. Hassett’s background is in tax policy and political campaigning, not monetary policy or financial market operations. When he met with the influential Treasury Borrowing Advisory Committee earlier this year, he reportedly spent little time on markets and instead pitched White House priorities… including a discussion about Mexican drug cartels. That doesn‘t exactly scream “focused on the yield curve.” It raises a real question: would he lead the Fed, or just be Trump’s ambassador to it?
What Happens Next?
So, where does this leave us? The Treasury’s official response was a masterpiece of non-answer, saying the “expected distribution of market outcomes” for the five potential chairs was “extremely narrow.” That’s bureaucrat for “we hear you, but we’re not showing our cards.” Trump says he’ll pick early next year. The market has now fired a very clear warning shot. If he nominates Hassett anyway, it will be interpreted as a direct signal that Fed independence is being downgraded. That would likely mean immediate volatility, a weaker dollar, and a steeper premium demanded for long-term debt. The irony? In trying to install a chair who will deliver lower rates, Trump might inadvertently trigger the very bond market stress that pushes long-term yields higher. The market is always watching, and right now, it’s watching very, very closely.
