Treasury yields rose Thursday after the fourth quarter gross domestic product report was better than expected even as investors worry about a looming economic recession.
The benchmark 10-year Treasury yield rose 2 basis points to 3.485%. The 2-year Treasury yield was up 3 basis points at 4.166%.
Yields and prices have an inverted relationship and one basis point equals 0.01%.
Fourth-quarter GDP, a measure of economic growth, rose at a 2.9% annualized pact from October to December, the Commerce Department reported Thursday. That was slightly higher than the 2.8% reading economists surveyed by Dow Jones expected.
It showed that the U.S. economy cooled slightly in the last quarter of 2022 from the rapid recovery growth it saw as the country reopened and consumers were bolstered by stimulus money.
“Overall, it was a solid round of data that is consistent with the Fed continuing on with the steady quarter-point hikes at the next 2-3 meetings and then retaining a restrictive policy stance throughout the year. It’s primarily the jobless claims data that will keep upward pressure on rates throughout today’s session,” said Ian Lyngen, BMO’s head of U.S. rates.
Jobless claims data showed a decline last week, another indication that the labor market remains strong despite the Fed’s rate hikes.
Fears of a recession have grown louder in recent months as many investors believe the pace of the Federal Reserve’s interest rate hikes to tame high inflation could lead to the economy contracting. GDP is an important piece of data that could show if the U.S. economy is in recession or not – some economists say that two consecutive negative quarterly GDP readings signals such a slowdown.
The Fed is next meeting on Jan. 31 and Feb. 1. Markets are expecting the central bank to further increase interest rates by 25 or 50 basis points as its battle with persistent inflation continues.
Investors will also be closely following further earnings reports, paying especially close attention to corporations’ future guidance, which could hint at their expectations for the economy. American Airlines and Intel are among those reporting Thursday.
