Busy Week for Bonds Won’t Make Things Any Clearer for Traders

Bond traders looking for something to jolt the $27 trillion Treasury market out of its recent rut will probably still be left waiting for answers, even after a busy week packed with a Federal Reserve meeting, the government’s quarterly debt-sale plans and a slew of economic data.

US 10-year notes have sagged so far this year and yields have steadily climbed. The declines in Treasuries have all but erased the advances made since last month, when Federal Reserve policymakers signaled an end to the latest cycle of monetary tightening. As investors anxiously await a new catalyst, they’ll likely only get more volatility in the days ahead rather than decisive signals that would have the potential to break bond yields out of their recent range.

That’s because the Fed isn’t expected to change its policy stance at this meeting. And with multiple monthly readings on inflation, consumption and jobs still to come before the March meeting, bond markets still won’t know the US central bank’s policy path after next week concludes.

Data released last week provided fresh evidence that the economy is humming along, giving the Fed more room to wait before pulling the trigger on rate cuts. Meanwhile, after the Treasury’s decision in November to slow the ramp-up of long-term bond sales helped fuel the bond rally, Wednesday’s so-called refunding announcementt is expected to be more routine.

Underscoring the wait-and-see sentiment, a JPMorgan & Chase survey showed the percentage of investors who are neutral on the bond market has increased to the highest since April.

“The bond market needs to be patient, just as the Fed has to be here,” said George Catrambone, head of fixed income at DWS Investment Management Americas. “Every data point matters and it will remain this way until the Fed starts the rate-cutting cycle.”

More Bond Investors Turn to Neutral Positioning