Traders Brace for Fed Talk Test as U.S Treasuries Fall

Treasury traders are bracing for a busy week of Federal Reserve speeches, looking for any hints on where U.S. monetary policy is headed next.

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Government bonds across maturities extended losses on Monday, marking a fourth straight decline after a strong rally that had lifted Treasuries nearly 6% year-to-date before the Fed’s policy meeting concluded last Wednesday, according to Bloomberg data. Yields on the benchmark 10-year note climbed, holding around 4.14%.

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Much of last week’s attention centered on the Fed’s quarterly update of its interest rate outlook. The so-called dot plot showed a median forecast of two additional cuts this year, but the wide range of individual views highlighted just how divided policymakers have become raising the stakes for this week’s lineup of Fed speakers.

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“The lack of major economic data releases means investors will be hanging on every word from the Fed, which increasingly looks split on its path forward,” wrote BMO Capital Markets strategists Vail Hartman and Ian Lyngen. “While the median dot points to two cuts by year-end, roughly a third of FOMC members project no further easing in 2025.”

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Monday’s speaking calendar was packed, featuring New York Fed President John Williams, Cleveland Fed President Beth Hammack, Richmond Fed President Thomas Barkin, and Fed Governor Stephen Miran. Each day this week has Fed officials scheduled to speak, culminating with Chair Jerome Powell’s remarks on Tuesday his first since last week’s policy decision.

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Earlier in the day, St. Louis Fed President Louis Alberto Musalem said he backed last week’s rate cut, describing it as insurance against potential labor market weakness. However, he cautioned that persistent inflation leaves little room for additional reductions.

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The uncertainty over Fed policy direction also rippled into currency markets, where the dollar edged slightly lower on Monday.

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The dot plot reinforced just how divergent policymakers’ outlooks are. While the median suggests two more cuts this year, many projections indicate no further easing until 2026. One forecast, however, sees the fed funds rate falling to 2.88% by the end of 2025 a projection Fed Governor Miran later confirmed as his own during a CNBC interview on Friday.

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Chris Weston, head of research at Pepperstone Group, summed up the week as “a Fed talk fest,” with Powell’s Tuesday speech taking center stage. “Miran spoke on Friday, but today’s remarks will expand on his call for 150 basis points of cuts this year with little recession risk,” Weston said. “It almost feels like a pitch for the chair’s seat.”

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