Bank of America warned that the DOJ criminal investigation into Fed Chairman Jerome Powell adds new risks to US monetary policy, although market reaction so far has remained limited.
The 30-year Treasury yield rose only slightly, suggesting investors have yet to show serious concerns about the Federal Reserve's independence.
This contrasts with the market reaction in the middle of last year when speculation of Powell's dismissal triggered a more significant jump in bond yields.
Bank of America believes Powell's firm response has increased investor confidence that he will remain as Fed governor after his term as chairman ends.
However, the investigation has the potential to reinforce the hawkish stance within the FOMC, thus undermining the prospects for a rate cut by the next Fed chairman.
