Treasury returns were mixed on Thursday morning after revised data showed the US economy shrank more-than-expected at an annual rate of 1.5% in the first quarter, although weekly jobless claims reflected a still-strong labor market.
What returns do
The yield of the 10-year Treasury note TMUBMUSD10Y,
was 2.751% vs. 2.746% as of 3:00 p.m. ET on Wednesday.
The yield of the 2-year Treasury Note TMUBMUSD02Y,
was 2.436% versus 2.50% on Wednesday afternoon.
The yield of 30-year government bonds TMUBMUSD30Y,
was 2.991%, compared to 2.965% late Wednesday.
What moves the market
Revised data released on Thursday shows the US economy contracted a more-than-expected 1.5% a year in the first quarter, mainly on the back of a record trade deficit. This contrasts with a previously estimated decline of 1.4%. Corporate earnings fell for the first time in five quarters.
Meanwhile, US jobless claims fell 8,000 to 210,000 last week, suggesting layoffs remain extremely low. Economists polled by the Wall Street Journal had expected claims totaling 215,000 in the seven days ended May 21.
Concerns about US growth have caused Treasury yields to retreat from their highs seen earlier this month when 10-year rates briefly topped 3.2% and are at an intraday high of around 3 1/2 years were traded. Yields had risen sharply for most of the year as investors focused on inflation and the Federal Reserve’s ability to contain price pressures without plunging the economy into recession.
The Fed, which is expected to start winding down its balance sheet on June 1, raised interest rates by half a percentage point on May 4 after a more traditional hike of a quarter point, or 25 basis points, earlier this year. Fed officials had earlier signaled at least two more half-point hikes ahead.
The Treasury will auction $42 billion of 7-year TMUBMUSD07Y notes.
Friday will take a look at the Fed’s preferred indicator of inflation, the core personal spending inflation rate.
What Analysts Say
“The earnings drop is a reminder that while most economists, including Fed staff and FOMC participants, dismissed the contraction as abnormal, caused by factors often volatile, or otherwise unimportant, it was real nonetheless.” said Chris Low, chief economist at FHN Financial. “The fall in corporate profits underscores the reality of the drop in output. It reflected a slowdown in inventory investment and weakness overseas, but was still real enough to undermine profitability.”
https://www.marketwatch.com/story/treasury-yields-edge-lower-ahead-of-jobless-claims-revised-gdp-11653564280?rss=1&siteid=rss 10-year Treasury yield remains steady at 2.75% as investors assess GDP data and jobless claims