Section IV Essay

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Section IV One of the first factors that affect the price and yields of a Treasury Securities is U.S. Labor Report. The report is published the first Friday of every month with key employment data for the previous month. The data that is provided will include information ranging from the number of jobs added or lost, total hours worked, average hourly wages, and unemployment rate. This report has the largest influence on the bond market out of all the reports that are published every month. The labor report will indicate the health of the economy. A strong economy will encourage companies to hire more workers because there will be more money in circulation to be spent on goods and services. If an economy has no job growth, it is likely to be limited no matter what other factors are influencing the economy. Since the labor report is important investors will look at the report to tell them if there has been a positive or negative impact in the past month. A positive Labor Report is a sign that the economy is on track. There are two reasons that bond prices will fall when there is a positive report. First, the likeliness of the Federal Reserve to raise the interest rates in the future. Second, Federal rate is a major influence on yields for short term bonds. According to Zeng (2014a), the U.S economy added 248,000 nonfarm jobs in September. Economists had expected 215,000. August’s job growth was revised to 180,000 from 142,000 previously reported. With the current job report the benchmark 10- year note was 8/32 lower, yielding 2.465% according to Tradewed. When the fed raise the interest rates the yields will rise and prices will fall.

On the other hand, when a negative job report is released it will be positive for the bond market. A weak job market will influence the Fed to cut interest rates and reduce the odds of inflation. According to Zeng (2014b), Treasury Bonds strengthened on Friday as a disappointing U.S employment report for August boosted the allure of haven assets. The benchmark 10 year note was 8/32 higher, yielding 2.418%, according to Tradeweb. With a negative job report both factors influence a positive performance of Treasury Bonds and other rate sensitive investments.
A second factor that affects the price and yields of a Treasury Securities is interest rates. This factor will affect every investor in the United States. Interest rates fluctuate all the time and affect different markets in different ways. When the Fed raises the interest rates the bond values will decrease. According to Zeng (2014c), Treasury bonds slid on Friday, capping a two – week selloff on concerns that the Federal Reserve could send stronger signals about
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