U.S. Treasury yields climbed on Thursday after the government said gross domestic product grew more than expected in the first quarter, signaling that the U.S. economy may be farther from a recession than previously feared.
The yield on the 10-year Treasury was last up by over 11 basis points to 3.829%, while the 2-year Treasury jumped 16 basis points to 4.884%.
Yields and prices move in opposite directions. One basis point equals 0.01%.
Revised data released Thursday showed GDP increase at a 2% annualized rate in the first quarter, up from a previous estimate of 1.3%. The figure was also ahead of the 1.4% forecasted by Dow Jones.
Weekly jobless claims offered another hint of good news for the state of the economy. Claims fell to 239,000 and the lowest level since May, and below the 264,000 expected by economists surveyed by Dow Jones.
“Overall, the combination of an improved growth profile for the start of the year and a challenge to the budding concerns on the trajectory of the labor market have triggered a bearish repricing in Treasuries,” wrote Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.
Elsewhere, investors weighed the outlook for interest rates after Fed Chair Powell said on Wednesday that policymakers are expecting further restriction. His recent remarks suggested that inflation is still running too high and rates needed to go higher in order for it to come back down.
This has sparked concerns among many investors who fear keeping rates elevated for longer or increasing them more will drag the U.S. economy into a recession. Powell addressed these concerns Wednesday, saying an economic downturn was possible, but not “the most likely case.”
Speaking in Madrid, Spain, on Thursday, Powell said that he expects it to take ‘a good while’ for low inflation to return and price increases to revert to the Fed’s 2% target.
