Traders Push US 10-Year Yield to 4% as Hassett Tops Fed Field

Bond

Central Bank

Summary:

Treasury Secretary Scott Bessent is leading the process to find a replacement for Powell, whose term as chair ends in May. Trump is expected to make an announcement by Dec. 25, with five candidates in the running.

Treasuries gained, pushing the 10-year yield to 4% for the first time in a month, after White House National Economic Council Director Kevin Hassett emerged as the front-runner to serve as the next Federal Reserve chair.

Yields dipped across tenors with the benchmark 10-year’s slipping two basis points to 4%, the lowest level since the Fed’s meeting in late October.

Hassett is seen by Trump’s advisers and allies as leading the race to replace Jerome Powell, Bloomberg News reported, citing people familiar with the matter.

“The argument will be a weaker US dollar, lower front-end rates from May’s meeting onwards and steeper curves,” said Jordan Rochester, a head of macro strategy at Mizuho in London. Hassett is “a credible economist by background, previously working at the Fed as a senior economist, but some may argue his closeness to Trump makes him the patsy.” Traders Push US 10-Year Yield to 4% as Hassett Tops Fed Field_1

Traders Push US 10-Year Yield to 4% as Hassett Tops Fed Field_1

The dollar slipped to a session low following the news, before paring the loss.

The move in Treasuries began earlier in the day after the release of data affirming labor-market weakness and a slump in oil prices.

Federal Reserve Governor Stephen Miran bolstered the outlook for rates by reiterating his view that the US economy needs large reductions. The Fed normally moves rates in increments of 25 basis points but has made moves of 50 basis points or more on occasion.

The addition of Hassett would give the Fed board two voting members — with Miran — “starting in June who are going to be arguing pretty proactively for 50, and the Fed chair generally gets what he wants unless there’s a strong argument otherwise,” said David Robin, an interest-rate strategist at TJM Institutional Services LLC.

“Hassett elevates the probability that the first one or two moves in the post-Powell regime are going to be 50,” he said.

Bessent said on CNBC that a key theme of his interviews has been simplifying the US central bank, which he indicated has become too complex in how it manages money markets.

Treasuries held their gains following the $70 billion auction — the biggest of the US government’s seven monthly fixed-rate debt auctions. The 3.562% auction result was slightly higher than the yield just before the 1 p.m. New York time bidding deadline.

With the hangover from the six-week US government shutdown that ended Nov. 12 continuing to delay official economic data, a debate over the likelihood of another Fed rate cut next month has turned on industry data such as ADP Research’s private payrolls gauges. For the four-week period ending Nov. 8, ADP reported an average drop of 13,500.

Market-implied expectations for a quarter-point rate cut on Dec. 10 held steady, with around 20 basis points of the move, close to 80%, priced in.

“The labor market is certainly softening and therefore getting ahead of it makes a little bit of sense,” Krishna Memani, chief investment officer at Lafayette College, said on Bloomberg Television. At the same time, the elevated inflation readings that some Fed policymakers say warrant pausing in December mean that 10-year Treasury yields “cannot drop too much even when growth is slowing.”

The Census Bureau and the Bureau of Labor Statistics released retail sales and producer prices data for September, more than a month later than originally scheduled, that were broadly in line with economist estimates. Neither elicited much market reaction.

Source: Bloomberg

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Manuel

Cryptocurrency

The intense selling pressure that has weighed on Bitcoin in recent weeks looks to be easing, raising hopes that the token’s brutal slide is nearing an end.

The original cryptocurrency was little changed at around $88,000 on Tuesday, well above last week’s slump that consigned it to a seven-month low, triggering massive liquidations and erasing more than $1 trillion in value from the broader digital-asset market.

The mood among traders remains cautious, highlighting the market’s fragile state. Bitcoin remains on track for its worst month since 2022, and exchange-traded funds investing in the token look likely to record their heaviest monthly outflows since launching. But after Bitcoin’s modest rebound, some see cause for optimism.

In the Bitcoin options market, the cost of purchasing downside protection has fallen sharply, with the premium for one-week puts over calls sliding to around 4.5% from a 2025 high of 11% reached on Friday, according to Caroline Mauron, co-founder of Orbit Markets.

“This indicates the level of stress has come down significantly, and investors expect we’ve seen the bottom for now,” she said.

Another metric drawing attention is Bitcoin’s 14-day relative strength index, now at 32 after a steep decline from early October. A reading of 30 or below typically signals an oversold asset while 70 or above indicates the opposite. Meanwhile, implied volatility on Bitcoin options — a gauge of expected future price movement — has returned to April levels, when tariff news induced a wave of selling. Bitcoin Recovery From Worst of Selloff Holds, Buoying Traders_1

Bitcoin Recovery From Worst of Selloff Holds, Buoying Traders_1

“This suggests traders are positioning for a breakout, which could of course be in either direction,” said Noelle Acheson, author of the Crypto is Macro Now newsletter. “But options skew shows that the bets on further drops are softening relative to those on a price increase from here.”

Global crypto exchange-traded products have seen more than $6 billion in outflows so far in November, the largest monthly withdrawal on record going back to 2018, according to data compiled by Bloomberg Intelligence. Even so, investors are largely staying put. The US Bitcoin ETFs’ combined redemptions of $3.7 billion in November represent about 3% of their $110 billion in assets.

For BlackRock Inc.’s Bitcoin fund (IBIT), short interest — measured by the dollar value of shares sold short — has plummeted, according to a report published by S3 Partners LLC. Bitcoin Recovery From Worst of Selloff Holds, Buoying Traders_2

Bitcoin Recovery From Worst of Selloff Holds, Buoying Traders_2

BTC Markets Analyst Rachael Lucas noted that Bitcoin’s muted trading on Monday could also indicate that selling pressure is subsiding. She sees $80,000 as the near-term floor, with $90,000 to $95,000 forming the resistance band to any meaningful rebound.

US stocks climbed after the tech sector trimmed the sharp decline it suffered earlier in the session as traders contended with the AI chip rivalry between Nvidia Corp. and Alphabet Inc. Investors have put the chances of a rate cut at the upcoming December meeting of the Federal Reserve at about 80%, up from 42% a week ago, according to futures contracts. Fed officials appear deeply divided over whether another reduction would be appropriate, following cuts in September and October.

“The market is going to be in wait-and-see mode until the Fed’s decision,” Orbit’s Mauron said. “Long-term holders who were exiting their position over $100,000 are seeing current levels as too low to sell and are back in holding mode, while those looking to accumulate new positions may try to wait for another dip below $85,000.”

As investors contend with a mix of concerns from a cooling US labor market to surging artificial-intelligence capital spending by major corporations, a risk appetite gauge maintained by Goldman Sachs Group Inc. has fallen to zero. The reading signals mounting pressure on speculative assets, including Bitcoin. A drop of this magnitude reflects fading risk enthusiasm and, at extreme levels, may even suggest that markets have overshot to the downside.

“Elevated equity valuations and bullish positioning increased vulnerability to shocks, especially within more retail-driven segments such as Unprofitable Tech,” wrote strategists at the bank including Christian Mueller-Glissmann.

Source: Bloomberg

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Manuel

Economic

The U.S. government posted a higher $284 billion deficit for October in a report delayed and impacted by the recent federal government shutdown and which reflected record tariff revenues offset by a shift of some November benefit payments into last month's data, the Treasury Department said on Tuesday.

The budget results for the first month of the 2026 fiscal year were delayed by a 43-day shutdown of many federal agencies, which caused delays of some payments, such as for salaries of government employees, a Treasury official said.

The deficit last month was up $27 billion, or 10% higher, than the $257 billion deficit posted in October 2024, largely due to the shift of some $105 billion worth of November benefit outlays for some military and healthcare programs into October.

Adjusting for these shifts, the October deficit would have been about $180 billion, a 29% reduction from an October 2024 deficit of $252 billion.

Outlays for October including the November benefit payments totaled $689 billion, up 18% from the $584 billion in October 2024. The Treasury official said the department did not have a precise estimate of how much outlays were reduced by the shutdown-delayed payments, but that the department believed the reduction would be less than 5% of total outlays.

Federal law requires any unpaid salaries and other obligations during government shutdowns to be fully paid when funding is restored.

Receipts for October totaled $404 billion, a record for the month and a 24% increase from the $327 billion collected in October 2024.

The biggest revenue driver was net customs duties, which for October reached a new all-time monthly record of $31.4 billion, up from $29.7 billion in September and $7.3 billion in October 2024.

President Donald Trump said on Monday that tariff revenues would soon "skyrocket" to new records, arguing that businesses have largely depleted an inventory buildup of imported goods prior to his tariffs and would have to now import goods at higher tariff rates. His comments on the Truth Social site appeared to be aimed partly at the U.S. Supreme Court, where justices earlier this month cast doubt on the legality of tariffs Trump imposed under an emergency law.

"I look so much forward to the United States Supreme Court's decision on this urgent and time sensitive matter so that we can continue, in an uninterrupted manner to, MAKE AMERICA GREAT AGAIN!" Trump wrote.

Meanwhile, the Congressional Budget Office said last week that recent tariff reductions brought about by U.S. trade deals with partner economies had caused the agency to cut its estimate for how much Trump's tariffs would reduce U.S. budget deficits over the next decade by 25% to $3 trillion, including interest costs, from the $4 trillion the agency projected in August.

Source: Reuters

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Manuel

Central Bank

Commodity

Gold advanced after a report that White House National Economic Council Director Kevin Hassett is seen by advisers and allies of US President Donald Trump as the frontrunner to be the next Federal Reserve chair.

With Hassett, Trump would have a close ally at the independent central bank, according to people familiar with the matter, Bloomberg reported Tuesday. Hassett is seen as someone who would bring the president’s approach to interest-rate cutting to the Fed, which Trump has long wanted to control, some of the people said.

The dollar and bond yields pushed lower after the report, helping lift bullion by as much as 0.5%. Gold typically benefits in a lower-rate environment as it pays no interest.

The precious metal slipped earlier as traders assessed the prospects of a peace deal between Ukraine and Russia, and the Federal Reserve’s interest-rate outlook following fresh economic data that was delayed due to the US government shutdown.

ABC News reported Ukrainian officials had agreed to a plan to end the war. The US is holding discussions with Russian officials in Abu Dhabi about a possible deal, and Ukraine’s military intelligence chief also is attending meetings.

In the days since White House Special Envoy Steve Witkoff and Russian counterpart Kirill Dmitriev hammered out a peace proposal, Ukrainian and European officials hurried to draft a counteroffer that would provide far less favorable terms to Russia. The result is a winnowed-down 19-point plan, according to people familiar with the matter. Russian officials have called it a nonstarter.

Meanwhile, US government data showed retail sales rose modestly in September while wholesale inflation picked up, reflecting higher energy and food costs.

Initial declines in equity markets also weighed on gold as some investors unwound bullion positions to cover losses. US stocks climbed after the tech sector trimmed the sharp decline it suffered earlier in the session.

“A potential peace deal may reduce the geopolitical risk premium and may trigger some profit-taking,” said Ole Hansen, head of commodity strategy at Saxo Bank. Stock market jitters initially sparked some selling in gold but the negative impact was limited, he added.

Traders are focusing on the prospects for lower interest rates in the world’s biggest economy as well as signs of stress in the money market. That may underpin gold prices given the potential risk of fresh quantitative easing, Hansen said.

Gold has consolidated after pulling back last month from a record peak above $4,380 an ounce, with some investors fearing the rally had gone too far, too fast. Still, the metal has gained about 55% this year and is on track for its best annual performance since 1979, supported by elevated central-bank purchases and inflows to exchange-traded funds.

Gold was 0.4% higher at $4,152.64 an ounce as of 12:33 p.m. in New York. The Bloomberg Dollar Spot Index fell 0.4%. Silver, platinum and palladium all gained.

Source: Bloomberg

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Justin

Central Bank

White House National Economic Council Director Kevin Hassett is the front runner to succeed Fed Chair Powell, according to Bloomberg, citing people familiar with the matter. Speaking on CNBC earlier, Treasury Secretary Bessent said that President Trump could announce his choice before Christmas.

The pick could very well be a trial balloon: for a long time the frontrunner was viewed as Fed governor Chris Waller, although his odds faded in recent weeks, amid speculation that Hassett was Trump's favorite, and sure enough, Hassett's odds spiked to a contract high 50% on Polymarket.

With Hassett, Trump would have a close ally whom the president knows well and trusts installed at the central bank, the BBG sources - who may well be leaking information at Trump's behest - said.

"Hassett is seen as someone who would bring the president's approach to interest rate cutting to the Fed, which Trump has long wanted to control", Bloomberg reported, citing sources.

Hassett is also closely aligned to Trump's view on the economy, including that interest rates need to be lowered. He told Fox News on Nov. 20 that he would "be cutting rates right now" if he were the chair of the Fed because "the data suggests that we should." Hassett has also criticized the central bank for losing control of inflation in the wake of the pandemic.

The Fed has repeatedly served as a punching bag for Trump, with the president lambasting Powell for being "too late" to cut borrowing costs and publicly musing about firing him. The president has also assailed renovations on the central bank's campus and the White House is currently engaged in litigation over Trump's attempted dismissal of Fed Governor Lisa Cook.

That's put pressure on Treasury Secretary Scott Bessent, who is leading the selection process for the next Fed chair, to carefully balance candidates who are in favor of slashing borrowing costs and have the trust of both the president and financial markets.

Since the summer, Bessent has run the selection process to replace Powell, interviewing nearly a dozen candidates that have now been whittled down to five contenders: Hassett, Warsh, Waller, Fed Vice Chair for Supervision Michelle Bowman and BlackRock's Rick Rieder.

Bessent said interviews with those candidates will end this week. A smaller subset of finalists will soon meet with White House Chief of Staff Susie Wiles and Vice President JD Vance.

Still, Trump is known to make surprise personnel and policy decisions, meaning a nomination is not final until it's made public, and as anything Trump, there is a substantial chance of a major surprise when the announcement arrives.

The next chair is likely to be named to a 14-year Fed governor term that opens on Feb. 1. The term that expires at that time is currently held by Stephen Miran, who is on unpaid leave from the White House Council of Economic Advisers. Powell's term as chair of the central bank ends in May 2026, though he could remain on the board for two more years as a governor.

The BBG report that a dovish replacement is coming helped push stocks to session highs...

... and sent 10Y yields below 10%, in a steepening move that send short-end yields even lower.

Source: Zero Hedge

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Adam

Economic

Inflation has helped set back income growth to levels comparable to the slow recovery from the Great Recession more than a decade ago, potentially constraining the spending power of U.S. consumers ahead of the critical holiday retail season, according to an analysis of bank account data from the JPMorgan Chase Institute.

"Households are going into the end of the year with weak income growth and bank balances that remain flat, after adjusting for inflation," institute researchers concluded, while noting that in some cases checking and savings account balances may reflect money being diverted to higher-yield money market or similar funds to take advantage of current interest rates.

Still, the overall picture for consumer pocketbooks was at best mixed ahead of the peak spending weeks of the year, with some key demographics stressed, but higher wealth groups able to tap equity and property market gains if needed.

As of October, the institute estimated median income growth for individuals between 25 and 54 years old at 1.6% once adjusted for inflation, similar to that seen in the early 2010s when the unemployment rate was running around 7% and falling only slowly, compared with the current jobless rate of 4.4%.

Younger workers are not seeing the same strong income gains that would typify those changing jobs and earning promotions early in their careers, the institute found. Roughly half of workers in the 50-to-54-year-old group have suffered an earnings loss once accounting for inflation.

"With pandemic-era excess cash liquidity in the rearview mirror, consumers are facing a holiday spending season with budgets tempered by tepid income growth but augmented by strong stock market gains - the latter highly unequally distributed," the institute concluded. "Importantly, nominal growth remains roughly consistent with pre-pandemic levels, but real purchasing power gains are at a relatively low level because of the higher pace of consumer price increases."

Since older workers typically see slower nominal wage gains, it is "easier for an uptick in inflation or weakening in the labor market to send them into negative territory."

Consumer prices as of September were rising at a 3% annual rate, a level rarely eclipsed in the years before the pandemic, up from a recent low of 2.3% in April.

Source: Reuters

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Devin

Commodity

OPEC+ nations gathering this weekend are once again grappling with the thorny question of how much oil they're physically able to pump.

In May, the Organization of the Petroleum Exporting Countries and its allies launched a new assessment of members' "maximum sustainable capacity" to help set production quotas in 2027. With output levels for the months ahead already set, delegates say this longer-term review will likely be one area of focus at Sunday's meeting.

The process looks increasingly necessary, as the struggle by some OPEC+ members to increase supplies as much as agreed this year indicates they may be nearing output limits. Clarifying their full capacity would help align quotas more closely with reality — and make any future cutbacks more credible.

OPEC's readiness to make new curbs could be tested in 2026 amid signs of a swelling global oil surplus and downward pressure on crude prices, which have slumped to near $60 a barrel in London. In a report on Monday, JPMorgan Chase & Co. indicated that the alliance may need to slash output next year to avert a plunge into the $40s.

But the capacity assessment also poses an area of friction for the organization, as some countries push for a higher estimate of their abilities and others refuse to admit they can't produce as much as claimed. In 2023, discord over the process led to the exit of long-term OPEC member Angola.

While group leader Saudi Arabia is capable of boosting output significantly, the outlook for other nations is less clear-cut. The United Arab Emirates and Iraq have been eager to expand capacity, but some members like Russia are challenged by international sanctions.

The review will be conducted with the assistance of several energy consulting firms, which in the past have included Wood Mackenzie and IHS, which is now a unit of S&P Global. Some groundwork was laid at a technical meeting in September.

One delegate said it remains unclear what OPEC+ will discuss during its set of online meetings on Sunday, beyond reviewing oil market conditions. The gatherings will also give key members the chance to review their production policy for early 2026, although some delegates said they don't expect any changes.

Eight of the group's members decided this month to pause further production increases during the first quarter — after ramping up supplies with surprising speed earlier this year — amid signs that a long-awaited glut is finally arriving.

RBC Capital Markets LLC believes they're unlikely to adjust policy until there's more visibility on geopolitical risks to the group's oil supplies: US sanctions on Russia and increasing belligerence toward Venezuela.

"We continue to contend that OPEC will stick with a watch-and-wait approach until there is more clarity," said Helima Croft, RBC's head of commodity markets strategy.