000 JOBS THIS MONTH, IN ACCORDANCE WITH THE CONSENSUS EXPECTATIONS

98,000 jobs this month, in accordance with the consensus expectations. The committee asks

Chan what will happen to the short-dated bond prices if the payroll report meets expectations.

The committee discusses the GDP growth forecasts which is expected to be weaker in the future

but more volatile as the economy adjusts to a changing interest rate environment. Chan believes

these factors will cause downward pressure on short-term government real rates.

Chan forecasts the real one-year risk-free rate to be 0.25% and average inflation over the next

year to be 1.25%. As part of his analysis, Chan reviews the current price of a zero-coupon

nominal Treasury bond with one year to maturity trading at $97.95 with a par value of $100.

Chan observes the difference in market pricing compared to his forecasts.