The world’s biggest bond market enters a potentially pivotal week with Treasuries regaining momentum as investors brace for signals from the Federal Reserve on its next crucial policy move.
Ten-year Treasury yields are coming off their biggest weekly drop since early June. Traders are betting the Fed isn’t done with stimulus even as last week’s release of the minutes from the Fed’s July meeting raised questions over the timing of any additional support for the economy.
While lawmakers are still struggling to agree on further relief measures, the focus will turn to Thursday’s speech by Fed Chairman Jerome Powell at the Kansas City Fed’s annual symposium. He’ll discuss the central bank’s long-awaited policy framework review, which is widely expected to lay the groundwork for a new inflation strategy. Traders are also looking for any hints on plans for the Fed’s bond-buying program. The upshot is that the days ahead could prove critical for interest rates, the economy and inflation.
“The fact that Powell is going to be speaking at Jackson Hole on the change in the Fed’s framework is really going to make it a potentially tradeable event,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.