Bond yields experienced a notable surge Friday after U.S. President Donald Trump suggested he preferred to keep his top economic advisor, Kevin Hassett, in his current White House role, rather than nominate him to lead the Federal Reserve. The shift in expectations has led Wall Street analysts to believe that Kevin Warsh, a former Fed governor perceived as more hawkish, now has a clearer path to succeed Jerome Powell as chair.

Trump's comments, made during a White House event where he publicly acknowledged Hassett's presence, injected uncertainty into the ongoing search for a new Fed chair, a position of immense influence in the global financial landscape. "I actually want to keep you where you are, if you want to know the truth," Trump said to Hassett, who serves as director of the National Economic Council. "I just want to thank you, you were fantastic on television the other day."

The remarks, while not a formal announcement, have significantly altered the perceived dynamics of the selection process. Hassett had been widely considered a leading candidate, owing to his existing relationship with Trump and his service since Trump's first term. Last month, Trump himself had identified Hassett as a potential Fed chair.

The Federal Reserve, responsible for setting U.S. monetary policy, plays a crucial role in shaping global economic conditions. Its decisions on interest rates and quantitative easing have far-reaching consequences for international trade, investment flows, and currency valuations. The appointment of a new chair is therefore closely watched by governments, central banks, and financial institutions worldwide.

Kevin Warsh, now seen as a stronger contender, is known for his more hawkish stance on monetary policy, generally favoring tighter credit conditions to control inflation. This contrasts with the more dovish approach often associated with Hassett, who is perceived to be more supportive of policies that stimulate economic growth.

Powell's term as chair concludes on May 15. While he could remain on the board as a governor, a move considered unusual, the focus is now on who Trump will ultimately nominate to lead the central bank. The decision will likely have a significant impact on the direction of U.S. monetary policy and, consequently, the global economy. The uncertainty surrounding the appointment has already contributed to volatility in bond markets, reflecting investor concerns about the potential for a shift towards a more aggressive approach to managing inflation.