Bond traders are getting twitchy, and Kevin Hassett is the reason why. The National Economic Council director has gone from long shot to heavy favorite for Federal Reserve Chair in just a few months, and the fixed-income crowd isn't loving it.

The Numbers Tell the Story

Hassett's nomination odds have rocketed from 30% at the end of November to 80% as of Sunday, according to Polymarket data. That dramatic shift followed President Donald Trump's remarks hinting at Hassett as his preferred pick. And here's the thing: Hassett has been pretty vocal about his appetite for aggressive rate cuts.

Bond yields have been creeping higher right alongside Hassett's rising chances, which tells you everything about what investors are thinking. They're pricing in a scenario where aggressive cuts now could mean painful rate hikes later.

Why Markets Are Nervous

The worry isn't complicated. Experts think Hassett might push for lower borrowing costs to keep Trump happy, potentially igniting inflation that the Fed would then need to stamp out with tighter policy. It's the economic equivalent of eating dessert first and then having to run extra laps.

Having a Fed Chair who's a close Trump ally raises questions about central bank independence. Will policy decisions prioritize long-term economic stability or short-term political wins? Bond investors are clearly betting on some level of tension there.

The Reality Check

Not everyone's panicking though. Some market watchers point out that the Fed Chair is just one of 12 voting members on the Federal Open Market Committee. Convincing more hawkish officials to embrace aggressive dovishness might be harder than it sounds, according to reports. The institutional structure provides some guardrails.

Still, the bond market's reaction speaks volumes. Rising yields reflect genuine concern about what a Hassett-led Fed might mean for inflation expectations and the central bank's policy trajectory. Whether those fears prove justified depends on whether independence or influence wins out.