Bond Traders Prep for a ‘Very Vocal’ Fed, Debt Sales

Christopher Waller, a Federal Reserve governor, has supported lowering interest rates in December. (Aaron Schwartz/Bloomberg)

Key Points

• Investors in Treasury debt face a busy week, including numerous Federal Reserve speeches and $125 billion in bond issuance.
• More than 10 Federal Reserve officials, including San Francisco Fed President Mary Daly and governor Christopher Waller, are scheduled to speak.
• The yield on 10-year Treasury notes is 4.115%, with a 200-day moving average of 4.29%, indicating potential for higher yields if that level is breached.

Investors in Treasury debt should buckle up for a week full of news with the potential to move prices. A flurry of speeches by policymakers at the Federal Reserve and a wave of bond issuance are on tap.

Traders have been lost in the fog. Little federal economic data has been released for weeks because of the government shutdown, making it harder than usual to predict where interest rates, the biggest factor determining Treasury prices, are headed next. That has made commentary from the Fed unusually important.

More than 10 officials are scheduled to speak.

San Francisco Fed President Mary Daly kicked things off in an interview with Bloomberg on Monday, indicating she might favor cutting rates for the third time this year in December. That is a policy move that governor Christopher Waller, who is considered a potential successor to Fed Chair Jerome Powell, has supported.

The bond market will be closed for Veterans Day on Tuesday, but Fed governor Michael Barr will speak at the Singapore FinTech Festival at 10:25 p.m. Eastern time.

Wednesday kicks off with the Treasury’s annual market conference, where New York Fed President John Williams is scheduled to speak.

Philadelphia Fed President Anna Paulson, Atlanta Fed President Raphael Bostic, and Boston Fed President Susan Collins are speaking on Wednesday, as are Waller and Fed governor Stephen Miran.

Expect comments from the St. Louis Fed’s Alberto Musalem and Cleveland’s Beth Hammack on Thursday. Jeff Schmid and Lorie Logan, of the Kansas City and Dallas Fed banks, are up on Friday.

“In other words, the Federal Open Mouth Committee will be very vocal this week,” wrote Yardeni Research, referring to the Federal Open Market Committee.

While the officials’ comments will help refine expectations for near-term interest rates, the auctioning of $125 billion of Treasury debt this week will offer a real-time view of what investors are thinking now. If demand for U.S. debt is significantly weak, the focus on factors pressing the government to raise more funds will grow sharper.

At the top of that list are rising government spending and a U.S.-born workforce that is growing more slowly, limiting tax revenue.

A wild card is a potential Supreme Court ruling that could force the government to rescind tariffs rolled out under the International Emergency Economic Powers Act and to issue refunds to companies. “After all, losing the tariff revenues will rekindle concerns that a larger deficit will translate into larger auction sizes than the current [fiscal 2027] guidance from the Treasury Department,” wrote BMO Capital Markets’ rate strategist Ian Lyngen

The yield on 10-year Treasury notes is at 4.115%, while the 200-day moving average is 4.29%. A break above this level would mean yields are likely to go even higher, boosting the cost of a variety of commercial and consumer loans. Bond prices fall when yields rise.

Write to Karishma Vanjani at karishma.vanjani@dowjones.com.