The nomination of Kevin Warsh as Fed Chair last Friday was followed by a quick market reaction as long-end Treasury yields moved higher, the US dollar rebounded, and precious metals sold off. The curve steepened sharply on the day of nomination with the 10-year moving up 6 basis points while the 2-year remained unchanged, signaling market expectations of a more hawkish Fed tilt, especially around balance sheet reduction.

While we do not expect this nomination to change the near-term path of US monetary policy in a meaningful way, we remain actively and tactically positioned in both duration and credit where appropriate. We believe the increase in US rates volatility can create trading opportunities in rate ranges and relative value across regions.