10-Year Treasuries Into FOMC: What to Expect

1. Big Picture: What’s Been Driving Bonds?

Over the past several months, the U.S. Treasury market has been defined by diverging forces across the curve, the short end (2Y, 5Y) pricing near-term monetary policy outcomes and the long end (10Y, 30Y) reflecting inflation persistence, fiscal supply, and long-horizon term premium.

The short end has behaved like a proxy for rate-cut expectations, compressing aggressively whenever inflation cools or recession probability ticks higher. Meanwhile, the long end has been more sensitive to duration demand, bond auctions, and forward-looking macro risk, often moving independently when supply shocks or inflation surprises hit the tape.

The result? A curve driven by two narratives: policy timing vs long-run risk.

This sets the stage for next week’s meeting and the reaction likely depends less on the cut itself and more on the messaging around rate trajectory.

2. What did the Market do?

Following the U.S.–China tariff escalation in April (formerly referred to casually as the “Trump Tariff War,” though a better description is the Tariff Re-Escalation Phase), the ZN stabilized. Buyers stepped in between May to July 2025, compressing price toward the 112'08'0 region, which is a key daily resistance zone.

In early September, momentum shifted. Buyers overwhelmed offers and lifted prices through 112'08'0, and the move appears linked to expectations of a softer policy stance and improving forward inflation indicators during the first week of September.

Sellers responded at 113'07'0 area and market has been trapped in a three-month range between 113'25'0 high and 112'08'0 low.

This week, price rotated from the top of range and swept through the composite LVN 113'00'0 to 112'24'0, near the 1st 3 weeks of November composite VPOC.

3. What to Expect: Scenarios Into FOMC Week

Until the rate decision, compression seems likely.

Expect 2 way indecision before FOMC:
Expect two-way trade between 113'03'0 (LVN) and 112'24'0 (1st 3 weeks of Nov composite VPOC) as the market waits for the FOMC.

Bearish Scenario (Base case):

If sellers hold at 113'03'0, continuation lower toward 112'07'0 (range low / composite VAL)

Bullish Scenario:

If buyers reclaim 113'03'0 decisively, possible market move back up to 113'23'0 (Daily Range high), keeping the multi-month balance intact and potentially positioning for a breakout if FOMC guidance surprises dovish.

4. FOMC Risk: What Could Surprise the Market?

The market is currently pricing ~88.6% probability of a 25bps cut which means the cut itself is not the event. The surprise lies in the tone.

🟢 Bullish Bond Reaction (Yields lower) if:

• Forward guidance hints at a sequence of cuts, not a one-off
  
• Growth risks emphasized > inflation risks
  
• Dovish dissent or language suggesting easing bias remains intact

🔴 Bearish Bond Reaction (Yields higher) if:

• The Fed downplays future cuts or signals higher-for-longer
  
• Inflation risk is prioritized
  
• Dot-plot or press Q&A implies only one cut on table

Conclusion

Unless the press conference delivers a clear dovish or hawkish surprise, expect a similar indecisive, two-way response in the markets, similar to past FOMC market reactions.

What’s your call on ZN and the bond markets going into the week of FOMC? Drop a comment and give a boost so more traders can weigh in.

Disclaimer: This is not financial advice. Analysis is for educational purposes only; trade your own plan and manage risk.