“The jobs report to be announced in two days will surprise to the downside, leading US Treasury rates to immediately decline 20 bps across the curve.”
my question is shouldn’t bonds/treasury appreciate in a worse economy?
Surprise on the downside shows less people in employment than expected, potentially resulting from a weaker economy than was forecast which could result in slower economic growth. Remember yields are inversely related to prices, so if the economy is seen to be weaker than previously thought, investors will pile into bonds (like a flight to quality), driving prices up and yields down.
I might see this sentence as not read properly. It’s written US Treasury rates will decline immediately casuing bonds and T-bills to appreciate. Correct me if I am wrong.
Think about the conversation on the investor desk:
→ jobs report came in worse than expected, will eventually hurt equities (less people with jobs able to consume → lower growth → lower earnings, etc.)
—>so what to do? def not buy equities right now! Get ahead of the market (heh…) and 1. sell equities / buy treasuries (flight to safety)
—> buying treasuries crushes rates
That’s how i read it.
I echo the sentiment above - fear of an economic downturn/surprising negative economic news leads to a ‘flight to safety’, which would be to purchase US Treasury Bonds. Buying pressure leads to an increase in bond prices, which lowers yields. (Bond prices get bid up)