Bond yields steady as traders eye Treasury refunding, Fed decision and jobs data in coming days

In chronological order, Tuesday will see the latest monetary policy decision from the Bank of Japan, which has the potential to wobble the fixed income market if the central bank makes adjustments to its yield curve control policy.

Then on Wednesday, the U.S. Treasury will deliver its quarterly funding announcement and the Federal Reserve will give an update on monetary policy.

Markets are pricing in a 96% probability that the Fed will leave interest rates unchanged at a range of 5.25% to 5.50% after its next meeting on November 1, according to the CME FedWatch tool.

The chances of a 25 basis point rate hike to a range of 5.50 to 5.75% at the subsequent meeting in December is priced at 24%, though that may shift depending on what Fed Cahir Jay Powell says during his post-announcement press conference.

The Bank of England, on Thursday, is also expected to leave rates unchanged.

Then Friday delivers the big economic datapoint of the week; the October nonfarm payrolls report.

What are analysts saying

“We do not expect the Fed to make any changes to policy, and recent Fedspeak pointing to the tightening effect of higher long-term interest rates reinforces this view. This means the November FOMC meeting is unlikely to be a catalyst in moving yields materially in either direction,” said economists at Goldman Sachs led by Praveen Korapaty.

“We expect Treasury to announce $739 billion in private marketable borrowing as part of its quarterly refunding; yield curves could trade with mild flattening/steepening bias depending on the outcome. The recent uptick in risk premium improves the risk/reward to owning U.S. duration, particularly at longer holding periods,” the team at Goldman Sachs added.