Core Insights - The nomination of Kevin Warsh as Fed Chairman has initially reassured bond markets due to his experience and reputation as an inflation hawk, which reduces uncertainty in monetary policy [1] - A Warsh-led Fed is expected to focus on shrinking the balance sheet and potentially reducing forward guidance, which could increase bond market volatility even if rate cuts are still considered [1] Background - Kevin Warsh served as a Fed Governor from 2006 to 2011, a period that included the Financial Crisis and Great Recession, providing him with experience in both normal and emergency monetary policy [1] - His reputation as an inflation hawk and understanding of Fed independence are viewed positively by the markets [1] Potential Bond Market Impacts - A Warsh-led Fed may prioritize a smaller balance sheet, which involves more than just reducing Treasuries and MBS holdings; it also impacts funding markets [1] - The Fed's communication strategy may change under Warsh, potentially leading to increased volatility in the bond market due to less guidance [1] Next Steps - The confirmation process for Warsh is expected to proceed once the current political issues, such as the 'Powell subpoena' situation, are resolved [1]