Why Strong Jobs Numbers Can Make Bond Prices Fall

Every month, the US releases a jobs report.

Markets react.

Yields jump.

Financial headlines pop off.

And many are left wondering what that has to do with their long-term investment plan, especially if they don’t live in the USA.

If that sounds familiar, you're in good company. One of our The Daily News listeners put it perfectly:

"I'm confused when you said Treasury yields jumped after the jobs data. Surely if interest rates are expected to stay higher, bond prices go up, and yields go down? Am I overcomplicating it? Is it just that as the government issues new bonds, the return will be higher? And how often does the government even issue new bonds? Is it daily?"

Great question, and I totally get the confusion - it seems contradicting. What it boils down to is that strong jobs data = higher rates, and higher rates makes bond prices go down. Let's walk through it.

What is a jobs report, anyway?

Once a month, the US government publishes data on how many jobs the economy added or lost, and what the unemployment rate looks like, in a release often called the Employment Situation report.

January's report showed 130,000 new jobs added, nearly double what analysts expected.

When the number beats expectations, it signals that the economy is still running strong. And a strong economy changes what central banks are likely to do next.

From jobs to interest rates

Here's the chain reaction. When lots of people are employed and spending money, inflation can creep up. To keep it under control, central banks like the US Federal Reserve keep interest rates higher for longer. Strong jobs data basically tells markets: don't expect rate cuts anytime soon.

When employment is high, it also tends to mean businesses are growing and households have more to spend. That's good for the economy, but it can add to inflationary pressure if demand starts running ahead of supply. Either way, the message to markets is the same: rates are staying higher for longer.

Think of it like your bank offering a solid savings rate. You're not rushing to put your money anywhere else. But the moment rates look like they might drop, you'd want to lock in a better deal fast. Bond investors think the same way.

A quick word on bonds and Treasuries

Before we go further, let's make sure we're all on the same page.

A bond is essentially a voucher to be paid back later. A government or company borrows money from investors, promises to pay them a fixed amount of interest each year, and returns the original sum at the end of an agreed period. Simple enough.

When the US government specifically needs to borrow money, it issues what are called Treasuries. These are just US government bonds, nothing more exotic than that. They come in different lengths, from short-term bills to 30-year bonds. When you hear about the "10-year yield" or the "2-year yield" on the news, those are simply the returns on those specific bonds.

The yield, by the way, is simply the return you'd earn on a bond based on the price you pay for it today. It's not the same as the fixed interest payment on the bond itself, and that distinction is exactly where things get interesting.

Why yields jump when prices fall

Here’s where the main misconception comes in: it might feel like higher expected interest rates should make bonds more valuable. But it's actually the opposite.

When the US government issues a new bond, it sets a fixed interest payment. Say you're looking at buying a bond today - in a high-rate environment, that bond might pay £50 a year on a £1,000 investment, a 5% yield. That yield isn't random. It reflects exactly what the market expects from interest rates right now, which is why the jobs report matters.

When jobs data comes in strong, markets expect the Fed to keep rates higher for longer. If rates rise, newer bonds start offering higher payments - making older bonds, still paying the same fixed amount, less attractive. To sell an older bond in that environment, you'd have to lower the price.

In other words: higher rates don't make existing bonds more valuable.

They make them less valuable, because newer bonds immediately start offering a better deal. That's the key.

So when you hear "Treasury yields jumped after the jobs report", it means: investors decided that strong jobs data meant the Fed would keep interest rates high for longer, so they expected better returns from bonds, pushing existing bond prices down, and yields up.

It's not that the US government suddenly owes more on every bond it has ever issued. It's that the market for trading those bonds shifted.

How often are new bonds issued?

More often than you might think, but not quite every day.

US Treasury issues bonds on a regular cycle - some short-term bills nearly every week, longer-term bonds monthly or quarterly.

When rates are "higher for longer", each new round simply reflects that environment. The market adjusts gradually, not overnight.

Higher rates don't make existing bonds more valuable - they make them less valuable.

What this means for you

The bond market can feel like it's speaking a different language, especially when "good news" sends prices falling. But once you know the logic, it clicks.

Strong jobs data, higher rates expected, older bonds reprice, yields move up.

It's not chaos. It's just a lot of dominoes falling in a line. And knowing that is the kind of thing that keeps you calm when the headlines are anything but.

Bonds are generally seen as lower-risk assets, which also means lower returns on average compared to equities. If you do want exposure, most investors access it through funds or ETFs rather than buying individual bonds directly - but that’s a story for another day.