Bond Traders Eye Make-or-Break Data to Chart the Fed’s Next Move

“There is some growing concern, although not a huge issue yet, that the Fed won’t cut rates in December based on the timeliness and quality of the economic data,” said Jack McIntyre, portfolio manager at Brandywine Global Investment Management. He said that, coupled with the pullback in yields, “keeps us biased toward a neutral exposure in US Treasuries.”

What Bloomberg Strategists say...

Investors are nervous about faltering US economic growth. You can see it in 10-year bond yields hovering just over 4% despite 3% inflation. For bond investors this could be as good as it gets though. The two biggest drags on growth — high tariffs and a US government shutdown — could soon be resolved.

— Edward Harrison, Macro Strategist, Markets Live

For the full analysis, click here.

The exact timing of some of the delayed releases, as well as the November jobs report that would usually come during the first week of next month, has yet to be clarified. The Labor Department said last week that it may take some time to finalize the release dates.

Money managers are mindful of positive economic shifts that could push up yields, including a Supreme Court ruling striking down Trump’s tariffs.

Yet they broadly expect the Fed to continue to keep a bias toward easing policy even if it pause next month, which would likely prevent yields from rising too far off of recent levels. And market sentiment has been relatively bullish toward Treasuries as data points to cooling growth.

Some recent trades in Treasury options targeted a slide in 10-year yields below 4% from over 4.1% on Friday. JPMorgan Chase & Co.’s Treasury client survey for the week ending Nov. 10 showed the largest net longs since April 7. Investor demand for last week’s new 10- and 30-year bonds was also in line with recent averages.

“It would take a reemergence of strong growth and labor data to push two- and 10-year yields out of recent ranges,” said George Catrambone, head of fixed income at DWS Americas. “There isn’t an obvious reason to expect a strong rebound in the labor market.”

What to Watch:

Economic data: (Timing of releases delayed during shutdown remains in flux)
- Nov. 17: Empire manufacturing
- Nov. 18: ADP weekly employment preliminary estimate; import and export price index; New York Fed services business activity; industrial production; manufacturing production; capacity utilization; NAHB housing market index; total and net long term TIC flows
- Nov. 19: MBA mortgage applications; housing starts; building permits
- Nov. 20: September employment report; Initial jobless claims; Philadelphia Fed business outlook; leading index; existing home sales; Kansas City Fed manufacturing activity
- Nov. 21: Bloomberg Nov. US economic survey; S&P Global US manufacturing, services and composite PMIs; U. of Mich. sentiment and inflation expectations; Kansas City Fed services activity
Fed calendar:
- Nov. 17: New York Fed President John Williams; Minneapolis Fed President Neel Kashkari
- Nov. 18: Richmond Fed President Tom Barkin; Dallas Fed President Lorie Logan
- Nov. 19: Barkin; FOMC meeting minutes from October; Williams
- Nov. 20: Cleveland Fed President Beth Hammack; Chicago Fed President Austan Goolsbee; Philadelphia Fed President Anna Paulson
- Nov. 21: Williams; Logan
Auction calendar:
- Nov. 17: 13- and 26-week bills
- Nov. 18: 6-week bills
- Nov. 19: 17-week bills; 20-year bonds
- Nov. 20: 4- and 8-week bills; 10-year Treasury inflation protected securities