JPMorgan Calls to Sell 2-Year U.S. Bonds: Even if Yellen Becomes Fed Chair, Large Rate Cuts Will Be Difficult, While Einhorn Bets on "More Cuts"

As the Federal Reserve chair nomination nears confirmation, JPMorgan recommends treating “selling 2-year U.S. Treasuries” as a tactical trade, believing that even if hawkish Kevin Warsh takes over the Fed, it will be difficult to push for significant rate cuts amid solid economic fundamentals. However, David Einhorn, founder of Greenlight Capital, holds the opposite view, stating that the rate cut magnitude will be “far more than twice” and has already bought SOFR futures to position accordingly.
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Table of Contents

• CPI may exceed expectations
• Einhorn’s contrarian bet: Warsh will cut rates “far more than twice”
• Who will laugh last?

JPMorgan recently suggested investors consider “selling 2-year U.S. Treasuries” as a trading strategy. The bank’s strategists note that despite market focus on Kevin Warsh’s potential appointment as Fed Chair, the solid economic backdrop limits the scope for aggressive rate cuts.

JPMorgan strategists emphasize:

Strong economic growth and sticky inflation will constrain front-end rates from falling significantly, making it unlikely for short-term rates to drop sharply from current levels.

Currently, markets expect the Fed to cut rates by 25 basis points as early as July, with another cut by year-end. The 2-year U.S. Treasury yield rose slightly to 3.47% ahead of CPI data release.

CPI May Surpass Expectations

JPMorgan also forecasts that January core CPI month-over-month could rise to 0.39%, significantly above the market consensus of 0.31%, reflecting early-year price adjustments and ongoing inflation pressures.

If CPI data indeed exceeds expectations, it will further limit the Fed’s room to cut rates, validating JPMorgan’s “sell 2-year Treasuries” trade logic. As markets realize rate cuts may be slower than anticipated, short-term bond prices could face downward pressure (yields rise).

Einhorn’s Contrarian Bet: Warsh Will Cut Rates “Far More Than Twice”

However, not all Wall Street views are bearish on rate cuts. David Einhorn of Greenlight Capital holds a starkly different opinion, having bought SOFR futures, betting on continued declines in short-term interest rates.

Einhorn recently stated publicly:

By the end of the year, the number of rate cuts will be far more than two. This is one of the best trades right now.

He believes that although Warsh is perceived as hawkish, he will actually lean toward easing once in office. Einhorn points out that Warsh will argue, “As long as inflation doesn’t spike to 4-5%, productivity gains support rate cuts,” meaning he would lower rates even if the economy remains hot.

Who Will Laugh Last?

The core debate is: will Warsh be a “pragmatic dove” or a “constrained hawk”?

JPMorgan’s view is that regardless of who becomes Fed Chair, economic data will ultimately determine the rate path. The current momentum of U.S. economic growth and persistent inflation simply do not support large rate cuts.

Einhorn, on the other hand, believes Warsh’s personal policy inclination will outweigh data constraints, and he will find reasons to persuade the Fed to adopt a more dovish stance.

Warsh was officially nominated by Trump on January 30 and is seen as one of the biggest variables in the global financial markets in 2026. With CPI data imminent, short-term Treasury market volatility is likely to intensify, and this Wall Street rate cut debate is about to unfold.