US Treasury bonds rise, ushering in a critical week: markets closely watch Besent's "fiscal measures" and Walsh's debut at Jackson Hole

According to Zhitong Finance APP, at the start of this week, the US Treasury market edged higher, with market attention focused on the upcoming speeches by US Treasury Secretary Scott Besant and Federal Reserve Chair Kevin Walsh. Their remarks could become key indicators for the next direction of bond yields.

On Monday, yields on US Treasuries of various maturities generally fell. The previous week saw sharp market fluctuations: the 30-year US Treasury borrowing cost had briefly approached its highest level in nearly twenty years before the US Treasury intervened by increasing buybacks, calming market sentiment somewhat. At the time of writing, the yield on the 10-year Treasury had dropped 3 basis points to 4.71%, and the 30-year yield also retreated by a similar margin to 5.24%.

What investors are most concerned with now is Treasury Secretary Besant's next move. Last week, he unexpectedly announced an expansion of long-term Treasury buybacks, catching the market off guard. Now, bondholders are eagerly awaiting more details regarding the "fiscal measures" Besant previously mentioned—a plan he regards as one of the main ways to tackle the US’s massive fiscal deficit.

Meanwhile, Walsh is also a focus of the market. He will deliver a keynote speech this Friday at the annual Jackson Hole conference hosted by the Kansas City Fed. There is broad expectation that he will have to directly address a thorny issue: with inflation continuing to exceed target, how will the Federal Reserve coordinate its policy with Besant’s intervention to lower long-term borrowing costs?

"This week, the market will be shaped by Kevin Walsh’s first speech as Fed Chair at Jackson Hole," said Geoff Yu, Senior Market Strategist at BNY Mellon, "With long-term Treasuries remaining highly sensitive, investors urgently need clarity on how the Fed will respond to the Treasury’s policy moves."

Yu also noted that the July Personal Consumption Expenditures (PCE) data, to be released on Wednesday, is expected to “further escalate the tension this week.” According to economists surveyed, the year-on-year growth of July PCE is expected to slightly slow to 3.6%, down from 3.7% the previous month; core PCE is projected to remain unchanged at 3.3%.

Since taking office in May, Walsh has not given much forward guidance. However, his public appearance following the last policy meeting triggered a major market selloff, underscoring market sensitivity to this Friday’s speech.

Although yields fell slightly on Monday, their current levels remain close to where the Treasury intervened last week—a signal the market interprets as the US Treasury being uneasy with today’s borrowing costs. One of Besant’s key tasks, assigned by Trump’s appointment, was to do his utmost to suppress yields at a time when annual US interest expenses have far exceeded 1 trillion dollars.

However, according to a report issued by PIMCO’s Chief Investment Officer for non-traditional strategies, Marc Seidner, and Head of Emerging Markets Investing, Pramol Dhawan, the firm is considering increasing bond holdings if yields rise further.

"From our perspective, current yield levels are increasingly attractive by historical standards, offering long-term investors valuable entry opportunities," they wrote in the report. "We remain optimistic about the value of bond market allocations."