Treasury yields fall after GDP report shows some signs of inflation easing
Treasury yields slid Thursday after the latest U.S. GDP report showed some signs that inflationary pressures could be easing.
The yield on the 10-year Treasury dipped 11 basis points to 3.902%. The benchmark note had been declining for the last two days. The policy-sensitive 2-year Treasury yield was down 12 basis points at 4.289%.
Yields and prices have an inverted relationship. One basis point equals 0.01%.
Treasurys
| TICKER | COMPANY | YIELD | CHANGE |
|---|---|---|---|
| US1M | U.S. 1 Month Treasury | 5.355% | +0.002 |
| US3M | U.S. 3 Month Treasury | 5.396% | +0.001 |
| US6M | U.S. 6 Month Treasury | 5.39% | +0.008 |
| US1Y | U.S. 1 Year Treasury | 5.203% | +0.038 |
| US2Y | U.S. 2 Year Treasury | 4.935% | +0.057 |
| US10Y | U.S. 10 Year Treasury | 4.479% | +0.045 |
| US30Y | U.S. 30 Year Treasury | 4.584% | +0.034 |
The report for U.S. gross domestic product showed 2.6% economic growth in the third quarter. Economists surveyed by Dow Jones were expecting 2.3%.
In addition to showing stronger than expected growth, the GDP report provided at least some good news on inflation.
The chain-weighted price index, a cost-of-living measure that is adjusted to reflect changing consumer behavior, rose 4.1% for the quarter, well below the 5.3% estimate. Also, headline inflation rose 4.2%, down sharply from 7.3%, according to a gauge the Federal Reserve uses.
"The GDP release this morning was a goldilocks number for risk assets," said Cliff Hodge, chief investment officer for Cornerstone Wealth. "Top line growth was solid, though consumption decelerated, it was still positive, highlighting resiliency in the major driver of the US economy. GDP was also helped by a normalization of trade. The major bright spot however, was in prices. The GDP Price index slowed dramatically quarter over quarter and came in below expectations. This is another sign pointing to the likelihood that the worst of inflation may be behind us."
Meanwhile, initial jobless claims came in at 217,000, which was 3,000 below expectations.
Questions around how high and for how long the central bank will continue to hike rates have grown louder in recent weeks, as many are concerned about the impact of monetary policy on the U.S. economy. The Federal Reserve is expected to hike rates by 75 basis points at its meeting next week.
On Thursday, the European Central Bank hiked its benchmark rate by 75 basis points. This comes after the Bank of Canada surprised markets by slowing its rate hikes to 50 basis points on Tuesday.