US Treasuries Gain as Powell Cites Risk for Inflation, Labor

Core Viewpoint - The market is closely monitoring Federal Reserve officials' speeches, particularly Jerome Powell's, for insights on future interest rate movements as Treasury yields experience fluctuations [1][3]. Group 1: Market Reactions - Treasury yields decreased by one basis point, with the 10-year bond rate falling to 4.13% [2]. - The market has faced pressure following last week's cautious comments from Fed officials regarding future rate cuts [2][3]. Group 2: Federal Reserve Insights - Jerome Powell is expected to clarify the rationale behind last week's rate cut, which he described as a "risk management" strategy, balancing job market concerns against inflation risks [3][4]. - Fed Governor Michelle Bowman emphasized the need for decisive action to lower rates to support the struggling labor market [7]. Group 3: Investor Sentiment - High uncertainty regarding the Fed's future path has led investors to engage in diverse bets on potential policy outcomes, as reflected in options trades linked to the Secured Overnight Financing Rate [5]. - Some investors are adjusting their expectations for rate cuts, targeting fewer cuts than currently priced in the market, while others are betting on significant cuts in upcoming meetings [6]. Group 4: Upcoming Treasury Auctions - A significant test of demand for US bonds is anticipated with the Treasury's upcoming sale of $69 billion in two-year notes, which is expected to perform well [4].