US long-dated Treasurys face more selling risk as investors await clearer Fed guidance

Bond investors will be watching Fed Chair Walsh’s Jackson Hole speech this week for signs of how he plans to deal with persistent inflation and fiscal concerns, with long-dated Treasurys seen at risk of further selling. Walsh has offered little forward-looking policy guidance since taking office in May. His remarks after the last monetary policy meeting sparked a broad selloff in the bond market, leaving traders highly sensitive to what he says on Friday. TD Securities U.S. rates strategist Molly Brooks said: "I think if he doesn’t give more information than he’s been giving, the market will be disappointed, and that could exacerbate the recent selling in long-dated Treasurys." Nationwide chief economist Kathy Bostjancic said the factors weighing on the bond market remain in place, including fiscal worries, inflation and uncertainty over how the Federal Reserve will respond. HSBC rates strategist Dhiraj Narula said the speech gives Walsh a chance to reassure investors by outlining the policy outlook. In his view, a judgment on potential inflation pressure could be enough to lower the uncertainty-related term premium.