Senator Thom Tillis has dropped his opposition to Kevin Warsh's potential confirmation as Fed chair. This development has dramatically increased the odds of Warsh being confirmed, with the market now pricing in an 88% chance of confirmation by May 15. This marks a significant shift from just 24 hours prior, when the odds stood at 29%.
The removal of Tillis's objection, previously the primary hurdle, has led to a strong market reaction. While the May 15 confirmation market has surged, the May 1 confirmation market remains low, indicating traders anticipate a clear but not immediate path to confirmation.
The market's response reflects substantial liquidity, with significant actual USDC traded in the May 15 market. This suggests serious investor interest rather than speculative noise.
Furthermore, with Tillis no longer blocking the nomination, the Justice Department's inquiry into Powell's renovations is unlikely to impede Warsh's appointment. Investors buying at the current 88-cent price for a confirmation by May 15 stand to gain a 1.14x return.
Key factors to monitor include the Senate Banking Committee's scheduling and any further announcements from the Justice Department regarding the Powell inquiry. A committee vote or an official closure of the investigation would likely further solidify Warsh's prospects.