(Bloomberg) — The US bond market, already stung by the worst selloff in six months, now heads into a crucial two-week stretch that will likely chart its course for the rest of the year.
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A series of market-moving events are coming in rapid succession, kicked off by the Treasury Department’s announcement Wednesday on the scale of its coming debt sales and by monthly payroll figures Friday that will show whether the economy is cooling enough to justify further interest-rate cuts.
That’s followed by even bigger ones next week: The Nov. 5 presidential election and, two days later, the Federal Reserve’s first meeting since it began easing monetary policy in September.
“The risk really for the next few weeks is elevated,” said Alex Chaloff, chief investment officer at Bernstein Private Wealth Management.
Treasury prices have tumbled sharply over the past month as the continued strength of the economy casts doubt on how deeply the Fed will cut interest rates in the months ahead. The presidential election has added to the uncertainty, with some investors speculating that a victory by Donald Trump will push yields higher on anticipation that his tax cuts and tariffs would fan inflation pressures and keep rates elevated.
While the Fed started easing last month with a half-percentage-point move, traders jettisoned once-widespread forecasts that it would continue to cut swiftly after data signaled the economy is expanding at a relatively rapid pace. As a result, yields have jumped sharply, pushing up borrowing costs across markets and sending Treasuries toward the first monthly loss since April.
“It’s been such a momentous cycle so far — and a lot can happen in the next two weeks,” said Sinead Colton Grant, chief investment officer at BNY Wealth.
That run of key news events is raising a risk that the selloff could gather some steam in the next few weeks, particular as investors position for fallout from the US election. In one sign of that, traders are paying the highest premiums this year for options that seek to protect portfolios against yield spikes.
Yet some of the upcoming events may also be supportive of the bond market. The Treasury Department is expected announce that it’s keeping the size of its debt auctions steady in the upcoming quarter — averting any supply pressures — though traders will also be paying close attention to any signals on the future trajectory.
