(Bloomberg) — The U.S. bond market, already hit by its worst selloff in six months, now heads into a crucial two-week stretch that will likely set its course for the rest of the year.

A series of market-moving events are fast approaching, starting with the Treasury Department's announcement on Wednesday of the rate of future debt sales and the monthly payrolls figures on Friday that will show whether the economy is cooling enough to further justify interest rates. the cuts.

That's followed by even bigger ones next week: the Nov. 5 presidential election and, two days later, the Federal Reserve's first meeting since it began easing monetary policy in September.

“The risk has really increased over the next few weeks,” said Alex Chaloff, chief investment officer at Bernstein Private Wealth Management.

Treasury prices have fallen sharply over the past month as the continued strength of the economy casts doubt on how deeply the Fed will cut interest rates in the coming months. The presidential election has added to the uncertainty, with some investors speculating that a victory by Donald Trump would push yields higher with forecasts that his tax cuts and tariffs would boost inflationary pressures and keep interest rates on hold. high.

As the Fed began easing last month with a half-percent move, traders dismissed once-widely held forecasts that it would continue to taper as data signaled the economy is expanding at a relatively brisk pace. As a result, yields have risen sharply, raising borrowing costs across markets and sending Treasuries to their first monthly loss since April.

“It's been such an important cycle so far – and a lot can happen in the next two weeks,” said Sinead Colton Grant, chief investment officer at BNY Wealth.

The yield on the 10-year note rose five basis points to 4.29% on Monday, the highest level since mid-July. This is from a low of around 3.60% in September.

This series of major news events is raising the risk that the sell-off could pick up some steam in the coming weeks, especially as investors position themselves for the fallout from the US election. In a sign of this, traders are paying up higher premiums this year for options that seek to protect portfolios against rising yields.

However, some of the upcoming events could also be supportive for the bond market. The Treasury Department is expected to announce that it will hold the size of debt auctions steady next quarter – avoiding any supply pressure – although traders will also be paying close attention to any signals on the future trajectory.

The Fed's preferred measure of inflation – the personal consumption expenditures price index – is expected to show that price pressures are easing somewhat, and the Labor Department is expected to report a decline in the number of job openings.

On Friday, the department is expected to report that U.S. employers expanded payrolls by 110,000 workers in October, up from 254,000, according to economists polled by Bloomberg, although the numbers could be skewed by the impact of recent hurricanes and strikes at Boeing Co.

“Anything up to about 180,000 is just the magic number,” said Bernstein's Chaloff, who sees anything below that as weak enough to support further Fed easing. Stronger print would see the central bank “need to think long and hard about what it does next”.

Other economic flashpoints over the next two weeks include the ongoing release of corporate earnings and a meeting of China's most powerful policymakers in Beijing, which could also rattle markets eager for fresh efforts to boost the economy. second largest in the world.

What Bloomberg strategists say…

Whether you prefer to focus on the macro or the micro, it's probably a good idea to stay in your seat next week. Five of the Magnificent Seven report earnings Tuesday through Thursday, and with Eli Lilly also announcing results that are six of the 10 largest companies in the S&P reporting market-moving news. Add in the PCE data and of course payrolls next Friday, and that's a pretty potent cocktail of potential volatility.

— Cameron Crise, Bloomberg MLIV macro strategist. Read more here.

When it comes to the US economy, however, there will be little guidance from the Fed itself with policymakers in the traditional blackout period on public comment before next week's meeting. Swaps are being priced at a more than 80% chance the Fed will cut rates by a quarter point on November 7. But they also signal a strong chance that he will remain consistent in one of the next two meetings.

The Fed's decision, however, could be overshadowed by the presidential race between Vice President Kamala Harris and Trump, especially if there is uncertainty over the outcome. For the bond market, much of the speculation has focused on the risk posed by a Trump victory, whose plans to cut taxes and tariffs could raise yields by fueling the deficit and raising import costs.

“There appears to be a correlation between the 10-year yield and Trump's path to victory,” said George Catrambone, head of Americas fixed income at DWS Group. This “seems to equate to higher yields.”

What to Watch

• Economic data:

  • October 28: Dallas Fed manufacturing activity
  • October 29: Wholesale and retail inventories; advancing the trade balance of goods; FHFA Housing Price Index; JOLTS job opening; Consumer confidence of the Conference Board; Dallas Fed services activity
  • October 30: MBA mortgage applications; ADP employment; Annual GDP price index QoQ (advanced in Q3); pending home sales
  • October 31: Shortcuts of challenging countries; initial unemployment claims; employment cost index; personal income and expenses; price index of personal consumption expenses; MNI Chicago PMI
  • November 1: October non-farm payrolls, unemployment rate and average hourly earnings; S&P Global US manufacturing PMI; construction costs; ISM production; Total vehicle sales department

• Fed calendar:

  • Fed observes communications breakdown ahead of November 6/7 policy meeting

• Auction calendar:

  • October 28: 13-, 26-week bills; two-year notes; five-year notes
  • October 29: 52 weeks bills; two-year floating rate notes; seven year notes
  • October 30: US Treasury's Quarterly Reimbursement Notice; 17 weekly bills
  • October 31: 4-, 8-week bills