Bond Investors Sound Alarm: Bessent Warned Against Hassett as Next Fed Chair
Wall Street's bond vigilantes are rattling their sabers. A brewing clash over the future leadership of the Federal Reserve is sending shockwaves through the corridors of power—and the trading floors.
The Warning Shot
Key figures in the massive bond market are reportedly delivering a stark message to influential voices: backing Kevin Hassett for the top Fed job is a dangerous bet. They see his potential nomination as a direct threat to the hard-won credibility of the world's most powerful central bank. Forget dry economic theory—this is a battle for market stability.
Why Traders Are Spooked
The fear isn't subtle. Investors who finance governments and corporations by buying debt crave predictability above all. A Fed chair perceived as overly political or ideologically rigid could shatter that calm, triggering volatility that makes last year's meme-stock frenzy look orderly. It’s the ultimate nightmare for portfolios built on steady interest-rate assumptions.
A Credibility Crisis in the Making?
The core of the warning hinges on independence. The bond market’s message implies that certain candidates might prioritize short-term political winds over long-term economic stability. When the guardians of the currency start taking orders, the money itself gets nervous. It’s a classic case of the market policing the policymakers—with trillions of dollars at stake.
The stakes for the Fed’s next move couldn’t be higher, proving once again that in finance, the most important appointments are often the ones you don't see on a ballot. After all, nothing says 'confidence' like bond traders having to vet the referees before the game even starts.
Treasury sounds out Wall Street on Hassett
The Treasury confirmed it meets often with market players. It said it “regularly engages with a variety of market participants and investors on important developments and dynamics in the Treasury market and broader financial markets.”
It also said that during those talks, market expectations across different asset classes for the five final Fed chair candidates were “extremely narrow.”
Hassett, the White House’s top economic official, has moved into the front of the race in recent weeks. TRUMP and Bessent reduced the original list from 11 candidates down to a short group.
On Tuesday, Trump said he plans to name his pick “early” next year. He also said Hassett is a “potential” choice. Right after that comment, the US dollar slipped for a short time.
The WHITE House allegedly responded through the Financial Times, saying the president will nominate the most qualified people and that talk about possible picks before an official announcement is “pointless speculation.” The Treasury added that it is “confident that [Trump’s] selection will serve the American people well.”
Inside the market, the mood is not calm. Some senior bond investors said they would rather see other names. They pointed to Rick Rieder of BlackRock and Christopher Waller from the Fed. They see both as more distant from Trump than Hassett.
Several people involved in the November discussions said the fear comes from Hassett’s close LINK to Trump. The president has pushed hard for sharp rate cuts. He also called Powell a “stubborn mule” for only lowering borrowing costs slightly this year.
Bankers and investors told the Treasury they worry Hassett could push for broad rate cuts even if inflation stays above the Fed’s 2% goal.
One market participant used a blunt warning. “No one wants to get Truss-ed,” the person said. The comment referred to the UK bond market collapse in 2022 after former prime minister Liz Truss rolled out tax cuts without funding.
The risk grows if US inflation moves higher next year. The Fed’s favored inflation gauge stood at 2.7% in August.
Big bond managers worry that a dovish Fed chair, combined with rising prices, could trigger a sharp sell-off in long-term Treasuries. One market player said loose policy plus high inflation is the exact mix that can break the long end of the bond market.
Fed board doubts and Hassett’s long résumé
Some investors also doubt Hassett’s ability to manage the Fed itself. They told the Treasury they are not sure he could unite a divided Fed board or lock down agreement on rate policy.
Among the people in those Treasury talks were members of the Treasury Borrowing Advisory Committee, or TBAC.
This group is made up of major Wall Street bond leaders. It advises Bessent on debt sales and market structure. Two people linked to the matter confirmed their involvement.
When Hassett met with TBAC earlier this year, the discussion stayed far from bond math. People familiar with the meeting said he spent little time on markets. He focused instead on White House priorities. That included talk about Mexican drug cartels.
Robert Tetlow, a senior policy adviser who recently left the Fed, shared his view. He said Hassett came across as “smart, eloquent and self-assured.”
Still, investors remain uneasy. They point to Trump’s constant attacks on the central bank over the past year. They fear that Hassett’s closeness to the president could weaken the Fed’s independence.
Claudia Sahm, now chief economist at New Century Advisors and a former Fed economist, put it this way: “Kevin Hassett is more than capable of doing the job of Fed chair, it’s just a question of who shows up. Is it the Kevin Hassett who is the active participant in the Trump administration? Or Kevin Hassett the independent economist?”
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