U.S. Treasury yields exhibited minimal movement on Monday, February 2, 2026, as investors parsed President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve chair.
The decision has injected a dose of hawkish uncertainty into monetary policy outlooks while simultaneously offering some reassurance on central bank independence.
The 10-year Treasury yield eased less than 1 basis point to 4.238%, the 2-year yield ticked up less than 1 basis point to 3.531%, and the 30-year yield dipped less than 1 basis point to 4.87%.
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Bond prices and yields move inversely, and the subdued trading underscores a market cautiously recalibrating expectations amid Warsh’s hawkish leanings and the broader economic resilience signaled by recent data. Warsh, a former Federal Reserve governor from 2006 to 2011 and a key figure in the Bush administration’s response to the financial crisis, was nominated late last week to succeed Jerome Powell, whose term ends in May 2026.
Described by Trump as “central casting” for the role, Warsh is seen as an inflation hawk with deep market expertise, having served as the Fed’s liaison to financial markets during turbulent times.
Experts like New York University’s Mark Gertler view the pick with “cautious relief,” citing Warsh’s experience and potential to reassure markets of the Fed’s independence, even as his past criticisms of quantitative easing (QE) as a “reverse Robin Hood” policy raise questions about future rate paths.
Warsh has advocated for a “regime change” at the Fed, critiquing its data reliance and balance sheet management, but he supports easing in 2026 if productivity gains allow for non-inflationary growth.
Market reactions to the nomination have been pronounced since Friday, with U.S. stock futures lower on Monday, the dollar strengthening, and Treasury yields edging higher initially before stabilizing.
Precious metals faced steep declines, with gold and silver deepening their historic sell-off, as investors interpreted Warsh as a signal for sustained or higher rates to combat inflation.
The pan-European Stoxx 600 and Asia-Pacific indexes extended losses, reflecting global unease over potential Fed policy shifts.
Analysts at Wells Fargo and Edward Jones suggest Warsh could represent a dovish tilt relative to Powell but tempered by the Federal Open Market Committee’s (FOMC) collective structure, potentially supporting two quarter-point rate cuts in the second half of 2026 if neutral rates around 3% are targeted.
Manufacturing data took center stage Monday, providing upbeat signals on economic health. The S&P Global U.S. Manufacturing PMI rose to 52.4 in January 2026 from 51.8 in December, above the preliminary estimate of 51.9, marking the strongest expansion since May 2022 with sharp output growth despite subdued new orders and export weakness linked to tariffs.
The ISM Manufacturing PMI surged even more dramatically to 52.6 from 47.9, beating forecasts of 48.5 and signaling the first expansion in 12 months, with new orders jumping to 57.1—its highest since February 2022—and production accelerating to 55.9.
These readings indicate a solid sector rebound, though input costs rose at the fastest pace since August amid trade uncertainties. Labor market indicators loom large this week, offering further clues on Fed policy space. The Job Openings and Labor Turnover Survey (JOLTS) for December 2025 is slated for release on February 3, with expectations around 7.21 million openings, down slightly from November’s 7.146 million.
The ADP private payrolls report for January 2026 follows on February 4, after December’s addition of 41,000 jobs and 4.4% annual pay growth.
Recent weekly NER Pulse data showed 7,750 jobs added for the four weeks ending January 3, 2026, slightly below the prior period’s 8,000. These metrics will inform whether employment risks have abated, following the Fed’s January removal of “downside risks to employment” language from its statement.
Analysts debated whether the pick alters the bullish equity setup, citing Warsh’s potential for “regime change” but dovish stance on rates.
Crypto markets felt the ripple, with Bitcoin briefly dipping to $75,000 amid the “Warsh Shock,” viewed as bearish short-term due to hawkish signals. Gold and silver’s plunge was attributed to a chain reaction from the nomination, hotter PPI data, and thin liquidity.
As Senate confirmation hearings approach—likely in spring 2026—Warsh’s testimony could clarify his stance on rates, balance sheet policy, and independence, potentially easing market jitters. Currently, the nomination’s hawkish undertones have pushed back rate-cut bets, contributing to a risk-off tone, though robust manufacturing data offers a counterbalancing narrative of economic strength.