Bond investors warn Bessent against Hassett as Fed chair

Bond investors are sending a strong warning to Scott Bessent about Kevin Hassett. They told the US Treasury they fear he would slash interest rates fast to please Donald Trump if he becomes Federal Reserve chair.

The concern is simple. They think policy would shift toward politics, and that scares the debt market.

These warnings came from private talks in November. The Treasury held one-on-one meetings with leaders from major Wall Street banks, large asset managers, and other big players in the US debt market.

The talks happened before Bessent started his second round of interviews to replace Jay Powell, whose term ends in May 2026. Multiple people familiar with the talks confirmed the timeline.

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?”

If you're reading this, you’re already ahead. Stay there with our newsletter.