Propose an economic theory that explains why the bond yeilds and prices react the way they do to employment report announcements. If there is a +100,000 payroll surpsurprise, the bond yields go up and prices go down. The 3-month T-bill yields go up by 3.26 basis points, the 6-month T-bill yields go up by 4.46 basis points, the 1-year T-bill yields go up by 5.26 basis points, the 2-year T-bill yields go up by 5.85 basis points, the 5-year T-bill yields go up by 5.25 basis points, the 10-year T-bill yields go up by 4.04 basis points, the 30-year T-bill yields go up by 3.19 basis points. Your explanation should be consistent with as many of the specific market responses of yields on bonds with various maturities.

Answer rating: 100% (QA)

One possible economic theory that can explain the reaction of bond yields and prices to employment report announcements is the Expectations Hypothesis ... View the full answer