DOJ Dropping Powell Probe Is Step in Right Direction, French Hill Says

The immediate market read-through is not about the building itself; it is about reducing a latent governance overhang on the Fed at a moment when the institution is already politically exposed. Dropping the criminal probe removes one channel for procedural delay and lowers the odds that leadership transition becomes entangled in a broader legitimacy fight, which is modestly supportive for front-end rate stability and risk assets sensitive to policy continuity.

Second-order, this is a net positive for the “Fed put” narrative because it reduces headline volatility around institutional independence. That matters most for rate-sensitive sectors over the next 1-3 months: housing, utilities, and small caps, where even a small increase in policy uncertainty can widen discount-rate assumptions and suppress multiple expansion. The bigger effect is on implied vol around Treasury yields rather than the level of yields itself.

The main risk is that the story doesn’t end here: if Congress keeps using governance as a proxy battle for monetary policy, the market can reprice higher term-premium risk even without any legal action. That would hurt duration assets and increase the value of hedges tied to the 2s10s curve and long-end volatility. The contrarian point is that the absence of a criminal case does not reduce political pressure; it may actually sharpen it by moving the debate from courts into appointments, which is harder for markets to discount.

Net, this is a small positive for policy continuity, but the tradeable opportunity is in cheap convexity rather than outright duration exposure. If the next Fed-chair narrative becomes more politicized, you can get a fast jump in rates vol before spot rates move materially.