Trump's Shift on Hassett Shakes Up U.S. Treasury Market

Market Reacts to Trump's Leadership Shift

U.S. Treasury markets saw significant movement after Trump suggested he may not nominate Hassett as Fed Chair, cooling expectations for rate cuts in 2026.

• The yield on two-year Treasury notes rose to 3.61%, the highest level since the Fed’s rate cut in December.
• Short-term interest rate contracts show a reduced likelihood of two 25-basis-point cuts this year.
• Markets continue to digest December's jobs data, with several Wall Street banks abandoning earlier predictions of a January rate cut.

Morgan inflation economists noted that further easing is unlikely despite the Fed leadership transition. John Fath, managing partner at BTG Pactual, said the market had bet on dovish leadership, but that trend is now reversing.