Fed Officials Not So Dovish? Focus on Powell's Speech Tonight!

U.S. Treasury bonds fell for the fourth consecutive session on Monday, after several Fed policymakers suggested the Fed would adopt a cautious approach towards interest rate decisions, cooling market expectations for consecutive rate cuts within the year. Tonight, Fed Chairman Powell is set to speak again less than a week after his last appearance, warranting close attention from investors.

The 10-year U.S. Treasury yield, often referred to as the "anchor for global asset pricing," hit its highest level since September 5th during overnight trading. The 2-year U.S. Treasury yield, which typically better reflects interest rate expectations, also reached a new three-week high of over 3.6% during afternoon trading in New York.

As reported by CJL on Monday, although the Fed announced a 25-basis-point rate cut last week and signaled more easing policies at future meetings, U.S. Treasury yields still rose last week. The climb in yields was driven by better-than-expected U.S. initial jobless claims data and generally optimistic Mid-Atlantic manufacturing activity data.

From the weekend to the beginning of this week, several Fed officials who ended their quiet period and delivered speeches appeared less dovish than one might imagine. New Fed Governor Stephen Miran, the sole dissenter at last week's meeting who supported a significant rate cut, reiterated his individual view on Monday. However, three regional Fed presidents maintained a cautious stance in their speeches on Monday.

St. Louis Fed President Musalem stated that he sees little room for further rate cuts, while Atlanta Fed President Bostic expressed a similar view in an interview. Cleveland Fed President Hamark pointed out that the Fed should proceed cautiously when assessing whether to cut rates further at its October and December meetings.