U.S. Treasury yields declined, with the 10-year yield falling below 4% for the first time in a month, as White House National Economic Council Director Kevin Hassett became the frontrunner in the race to succeed Jerome Powell as Federal Reserve Chair.

Traders quickly increased bets on rate cuts over the next year, reflecting market expectations that Hassett would implement aggressive easing as urged by President Donald Trump.

Yields fell across the curve, with the benchmark 10-year yield dropping 3 basis points to 3.99%, its lowest level since the Fed's late-October meeting.

Sources indicate that Hassett is seen by Trump's advisors and allies as the leading candidate to replace Powell.

"This implies a weaker dollar post-May next year, lower short-term rates, and a steeper yield curve," said Jordan Rochester, head of macro strategy at Mizuho Bank in London. Hassett is "a credible economist with experience as a senior Fed economist, but some may view his close ties to Trump as making him a puppet."

Following the news, the dollar weakened to session lows, with Bloomberg's dollar index posting its largest drop since September 17.

The rally in Treasuries extended earlier gains after data confirmed labor market weakness and Fed Governor Stephen Milan reiterated his view that the U.S. economy requires significant rate cuts. The Fed typically adjusts rates in 25-basis-point increments but has occasionally moved by 50 basis points or more.

David Robin, rates strategist at TJM Institutional Services LLC, noted that with Hassett's potential appointment, the Fed Board would have two voting members, including Milan, advocating for 50-basis-point cuts since June. "Unless there’s strong opposition, the Fed Chair usually gets their way," he said.

Treasury Secretary Scott Besant is leading the search for Powell's successor, whose term ends in May.

"Hassett’s emergence raises the odds of a 50-basis-point move in the first one or two actions post-Powell," Robin added.

**Oil Prices Decline** Falling oil prices amid prospects of a Ukraine peace deal and steeper gains in UK gilts also fueled the Treasury rally. Meanwhile, expectations of month-end Treasury buying limited short interest that could have slowed the advance.

Treasuries held gains after a $70 billion auction, where the awarded yield of 3.562% was slightly above pre-issuance trading levels at the 1 p.m. New York deadline.

With delayed economic data due to the six-week government shutdown ending November 12, discussions about another Fed rate cut next month have heightened focus on indicators like ADP’s private payrolls. Over the four weeks ending November 8, U.S. private-sector jobs fell by an average of 13,500 per week.

Market-implied expectations for a December 10 rate cut remained steady, pricing in about 20 basis points of easing, equivalent to an 80% chance of a 25-basis-point reduction.

"The labor market is indeed softening, so modest preemptive action makes sense," said Krishna Memani, Lafayette College’s CIO. However, some Fed policymakers argue that elevated inflation readings justify holding rates steady in December, meaning "a sharp drop in 10-year yields is unlikely even if growth slows."

The delayed September retail sales and producer price data, released by the Census Bureau and Bureau of Labor Statistics, largely matched economist forecasts without triggering significant market reactions.