Treasury yields fell on Thursday after a report showed faster than expected economic growth in the fourth quarter failed to push inflation higher.
The yield on the benchmark 10-year Treasury note dropped nearly 5 basis points to 4.13%, while the yield on the 2-year Treasury note dipped more than 6 basis points to 4.314%. Yields move inversely to prices and a basis point equals 0.01%.
Gross domestic product, a measure of all goods and services, increased at a 3.3% annualized rate in the fourth quarter of 2023. That compared to the Wall Street consensus estimate for a gain of 2%.
On the inflation front, core prices for personal consumption expenditures, which is the Federal Reserve’s preferred gauge, rose 2% for the period, while the headline rate was 1.7%.
On an annual basis, the PCE price index rose 2.7%, down from 5.9% a year ago, while the core figure excluding food and energy posted a 3.2% increase annually, compared with 5.1%.
Meanwhile, a weekly labor market report Thursday suggested the jobs market may be slackening. Initial jobless claims totaled 214,000, an increase of 25,000 from the previous week and ahead of the estimate for 199,000.
“Overall, it was a solid round of data that should keep the Fed’s on-hold intentions in place through at least Q1,” BMO’s head of rates Ian Lyngen said in a note. “It appears the combination of higher jobless claims and the drop in the price index have driven the market’s response.”
Auctions will be held Thursday for $90 billion each of 4-week and 8-week Treasury bills, along with $41 billion of 7-year notes.
