U.S. Treasury yields held in a narrow range as investors paused ahead of a dense stretch of economic data that could help define the near-term outlook for growth, inflation, and monetary policy. With markets still digesting shifting political dynamics in Washington and uncertainty around the trajectory of the U.S. economy, the bond market’s calm reflects a wait-and-see stance rather than conviction.

At midweek, the benchmark 10-year Treasury yield hovered around 4.27%, while the policy-sensitive 2-year yield edged slightly higher near 3.58%. The 30-year yield eased marginally below 4.9%, underscoring the lack of strong directional pressure across the curve. The muted moves suggest investors are reluctant to reposition aggressively before clearer macro signals emerge.

A Data-Heavy Week Comes Into Focus

Attention is firmly on a series of high-impact U.S. economic releases. The January ISM Services PMI is expected to shed light on whether momentum in the services sector—long a pillar of resilience—continues to offset softness elsewhere. Weekly jobless claims and Friday’s nonfarm payrolls report will further test the labor market narrative, particularly after recent signs of cooling without a sharp deterioration.

For bond investors, these releases matter less in isolation and more in combination. A reacceleration in employment or services activity could reignite concerns about sticky inflation, pushing yields higher. Conversely, evidence of slowing demand may reinforce expectations that interest rates have peaked, supporting longer-dated Treasurys.

Political Relief, but Lingering Uncertainty

Markets also drew modest relief after Donald Trump signed legislation ending a partial government shutdown, ensuring funding for key federal departments through the end of the fiscal year in September. While shutdown resolutions rarely produce lasting market rallies, avoiding prolonged disruption removes a tail risk that could have distorted economic data and undermined sentiment.

Still, the broader political backdrop remains a source of uncertainty. Investors are weighing how fiscal decisions, regulatory priorities, and potential policy shifts may interact with an already delicate economic balance. In the bond market, that uncertainty often translates into a preference for liquidity and duration flexibility rather than bold positioning.

Federal Reserve Signals in the Background

Adding another layer to the outlook, Federal Reserve Governor Stephen Miran stepped down from his role as chair of the Council of Economic Advisors, closing a chapter that linked the administration more directly with policy discussions. While the move is not expected to alter near-term monetary strategy, it reinforces the perception of transition within Washington’s economic leadership.

For fixed-income markets, the Federal Reserve’s reaction function remains the dominant force. Investors continue to debate not just when rate cuts might begin, but how restrictive policy will remain if inflation proves slower to return to target. The current stability in yields suggests that markets see risks as broadly balanced.

What Bond Investors Are Watching Next

The Treasury market’s composure may prove temporary. With inflation expectations, labor market resilience, and fiscal policy all in flux, even modest data surprises could prompt sharper moves. Yield curve dynamics will be closely watched for signs of renewed inversion or steepening, both of which carry important signals about recession risk and policy expectations.

Looking ahead, the path for yields will hinge on whether incoming data validate a soft-landing narrative or revive fears of overheating. For now, investors appear content to stay defensive, preserving optionality until the economic picture becomes clearer.