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All other things being equal, why would rising unemployment data lead to (a trend) of increasing bond futures?

Is the line of thinking that bond futures prices have the same relationship with economic data points such as interest rates and inflation as do bonds?

For example:

-Unemployment rising signals a potentially weak economy and (for sake of argument), the probability of interest rates being cut in the near future increases

-Bond prices would increase as interest rates fall, and futures prices on these bonds would also rise.

If anyone could clarify, that would be very helpful.

Thanks.

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Of course: bond futures are directly linked to the price of bonds (through a "conversion factor"), and prices of bonds move in the opposite direction of bond yields. The common sense view is that an increase in unemployment foreshadows or coincides with a Recession which is generally a period of low interest rates (both because the Fed lowers i.r. and because there is not much appetite for financing of long term projects, hence i.r are naturally low.

All this is every day business common sense, nothing to do with Quant Finance or formal Macroeconomics and its more complicated and more ambivalent models.

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Not really. I'd wager more on the lines of lower consumption hence higher business/country risk hence higher yields hence lower prices. Not everything that moves is tied to the Fed.

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  • $\begingroup$ When we say bond futures rising, I always assumed this meant the prices of them rather than the yield? $\endgroup$ – Curious Student Jun 23 '16 at 22:18

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