(Bloomberg) -- Longer-maturity Treasuries fell, steepening the yield curve, after Donald Trump’s move to oust Federal Reserve Governor Lisa Cook raised questions about the central bank’s ability to control inflation.

The yield on 30-year bonds climbed on speculation Trump would seek to replace Cook with a policymaker more inclined to cut interest rates, in line with his view that the Fed has been slow to ease monetary policy. Such an approach would likely lower short-term interest rates but risk stoking longer-term inflation expectations, dimming the appeal of fixed-income assets.

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“Trump’s removal of Fed Governor Cook reminds that the US administration remains unconventional and unpredictable, and market concerns that the Fed board could become stacked with doves could boost term premia and long end break-even inflation rates,” says Andrew Ticehurst, senior rates strategist at Nomura Australia Ltd. “Steepeners appear to be popular trades, but I think that is understandable in this environment.”

Trump sought to remove Cook following allegations that she falsified documents on mortgage application. Cook said she will not resign and disputed Trump’s authority to fire her.

Two-year yields fell amid speculation the Fed will cut interest rates as soon as next month. The gap between five and 30-year US yields widened to as much as 116 basis points — the steepest since 2021.

The latest headlines add to increasingly negative sentiment toward US assets as Trump’s trade policies and the ballooning deficit weigh on sentiment. Traders have been seeking alternative havens to the dollar and Treasuries all year, and any perception of an erosion in the Fed’s independence may speed up that process.

This all comes on top of worries about the US budget deficit after the House last month passed a $3.4 trillion fiscal package that cuts taxes and curtails spending on safety-net programs. Traders will be watching to see how this week’s Treasury auctions, which include five- and seven-year tenors, are received by market participants given the latest developments.

When S&P Global Ratings recently affirmed the AA+ credit score of the US, it warned that the country’s ratings “could come under pressure if political developments weigh on the strength of American institutions and the effectiveness of long-term policymaking or independence of the Federal Reserve.”

The Bloomberg Dollar Spot Index lost ground in early trading but soon pared its losses. Hedge funds in Asia-Pacific were reluctant to chase the dollar lower after Cook said she won’t resign, according to traders, who said funds are waiting to see how their London counterparts react to the news. Still, it was more bad news for a currency that has come under heavy selling pressure this year.

“Cook’s removal is dollar negative as it would create another opening for President Trump to appoint a new Governor who may be more inclined to support interest-rate cuts,” said Carol Kong, a strategist at Commonwealth Bank of Australia in Sydney. “It further challenges the independence of the FOMC that underpins the safe haven status of the dollar, which can in turn lead to more dollar selling.”

--With assistance from Masaki Kondo, Matthew Burgess and Rthvika Suvarna.

(Updates with details on yield curve.)

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