the bond report (what am i missing?)?

[DcifrThs]

this is Xposted in finance/investing, but since intelligent people frequent this forum i'd like to post it here as well. if it is inappropriate to post it here, feel free to notify me and remove it.




i feel like an idiot. and im definitely missing something here.

bond report (PIMCO bond report on cnbc)guy: "10 yr yields are down today as the employment report was revised upward"

if i am understanding what he said, it seems like employment is up. meaning unemployment is down.

thats a tightening of the labor market which means the demand/supply ratio is increasing (more demand/less supply due to relatively fixed labor market). that pushes the price for labor up.

increased wages puts upward pressure on inflation which means rates cuts are less likely and a static rate or (less likely) a rate hike is more likely.

thus bonds should be selling and prices droping, pushing yields up or at leaset keeping them stable...not having the 10yr trade at near lows for the year.

now that means there could be some lag and that i'm looking at the wrong part of the yield curve (i.e. tight market now means that in 10 yrs the cycle will be cutting rates to increase growth). but the bond guy directly linked the current employment report's upward revision to the purchasing of the 10yr that dropped its yield.

just talking this through: other downward pressures on the yield would be slowing growth, (to the point where a rate cut becomes more likely...in line w/ last 1.6% GDP increase in the latest quarter but countered by the latest employment report and the drop in unemployment), the chinese hardening their peg (they'd purchase dollars by selling yuan and using those dollars to purchase 10yr notes), and thats all i can think of off the top of my head.

thoughts? discussion? help?

Barron

[fnord_too]

Just thinking out loud:
Employment up implies economy up. Markets should rise. My first line of reasoning was that bonds should rise to compete, but perhaps companies need to rely less on bonds in a rising market due the ability to raise cash by straight lines of credit or new stock issuance. That or there is less need for fresh money as markets improve? Or, this may be it, stronger markets mean more confidence in the vehicle = less perceived risk = lower premium. Yeah, probably something like that. Spread between top tier and lesser bonds shrinks as confidence in the market increases (bond rate spreads are a slick indicator).

I'd clean this post up but I'd rather go home.