Volatility in the world's largest bond market has significantly subsided in recent weeks, but Federal Reserve Chair Jerome Powell's upcoming press conference could disrupt this calm.

With US policymakers increasingly divided on the interest rate outlook, traders are closely watching Powell's remarks for guidance. A softening labor market strengthens the case for policy easing, but stubbornly elevated core inflation metrics complicate the picture.

Interest rate swaps currently price in a 25-basis-point Fed rate cut on Wednesday, with roughly three additional cuts expected by July next year. However, Powell's commentary could alter these expectations, potentially breaking US Treasuries out of their recent tight trading range.

Any hawkish signals from Powell may trigger fresh selling pressure, pushing the 10-year yield above 4% and raising borrowing costs for the world's largest economy. As of 4:35 PM New York time, the benchmark 10-year yield held steady at 3.98%, while the more policy-sensitive 2-year yield remained unchanged at 3.49%.

"The market has priced in multiple Fed moves over the next 14 months—even minor surprises could drive yields 25-30 basis points higher," said Scott DiMaggio, Head of Fixed Income at AllianceBernstein. "Technically, the 10-year yield is pointing toward 4.25%."

"Caution remains warranted when trading Treasuries," noted David Chao, Global Market Strategist at Invesco. "While labor market weakness justifies modest policy easing, we're not yet on a guaranteed path to rate cuts."