Treasury Yields and Economic News Article
The article in question is “Treasury Prices Drift Lower
As Stock Market Stages Rally” published in the Wall Street Journal on
Monday, April 12th 2003.
I) The
article above says, “Underlying the Treasury market’s limited downside
Monday is the broad-based concern that even with the war in Iraq having been
completed, economic activity has still yet to pick up in any meaningful
way.” Using the expectations hypothesis and the Taylor rule provide an interpretation
of this comment in the article.
ii) The last
paragraph of the above article says, “But of far more importance will be
Federal Reserve Chairman Alan Greenspan’s testimony on the economy on
Wednesday, along with the release Friday of the April employment situation
report.” Suppose the economic release on Friday (i.e., May 2nd) shows that
the number of jobs (payroll) in the last month increased in the U.S. economy
more than what is expected; how will this affect the price of the 30 year Treasury
bond and equity prices? Provide an economic justification for your answer.
