Traders in the US Treasury market are looking for fresh clues on the path of US Federal Reserve (US Fed) policy from the plethora of US central bank officials slated to speak this week.
Treasuries of all maturities fell on Monday, adding to three days of losses after a sharp rally that had the market up nearly 6% this year before the US Fed meeting wrapped Wednesday, according to data compiled by Bloomberg. Benchmark 10-year yields traded higher, hovering at about 4.14%.
Much of the focus last week was on officials’ quarterly update of the forecast for policy rates. While the median of the so-called dot-plot suggested two more cuts this year, there was a wide dispersion of views, giving added importance to this week’s speakers.
“The dearth of economic data will put additional emphasis on the messaging from what has appeared to be an increasingly divided FOMC,” BMO Capital Markets strategist Vail Hartman and Ian Lyngen wrote in a note. “Recall that while the median dot is consistent with two more rate cuts by year-end, roughly a third of the Committee sees no further cuts in 2025.”
On the docket to speak Monday are New York President John Williams, Cleveland Fed President Beth Hammack and the Richmond US Fed’s Thomas Barkin, as well as US Fed Governor Stephen Miran. Each day this week has confirmed US Fed speakers, including Chair Jerome Powell on Tuesday.
Earlier on Monday, St. Louis US Fed President Louis Alberto Musalem said he supported last week’s interest-rate reduction as a means to take out insurance against a weakening labour market. Musalem said he sees limited room for more cuts amid elevated inflation.
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The uncertainty surrounding future US Fed policy also reverberated in currency markets, with the greenback trading slightly lower on Monday.
A large swath of forecasts in the dot-plot — despite the median indicating two more cuts in 2025 — don’t expect any more Fed rate cuts until 2026. Meanwhile, one projection puts the fed funds rate down to 2.88% by year’s end, which Miran said came from him, according to a Friday interview with CNBC.
Chris Weston, head of research at Pepperstone Group, described the week as “a Fed talk fest,” with “central focus” on Powell’s address on Tuesday. “While Miran spoke on Friday, today’s speech will further lay out the case behind his call for 150 basis points of cuts this year and minimal recession risk — possibly a pitch for the Fed chair position?,” Weston said.
