The policy-sensitive 2-year Treasury yield fell further into its lowest level since early June after U.S. third-quarter GDP was revised slightly downward.
What happened
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The yield on the 2-year Treasury
BX:TMUBMUSD02Y
fell 1.8 basis points to 4.349%, from 4.367% on Wednesday. Yields move in the opposite direction to prices. Thursday’s level is the lowest since June 1, based on 3 p.m. Eastern time figures from Dow Jones Market Data. -
The yield on the 10-year Treasury
BX:TMUBMUSD10Y
rose 1.7 basis points to 3.893%, from 3.876% on Wednesday. -
The yield on the 30-year Treasury
BX:TMUBMUSD30Y
climbed 3 basis points to 4.034%, from 4.004% on Wednesday. - The 10- and 30-year rates remained not far from their lowest levels since late July.
What drove markets
Data released on Thursday showed that the U.S. economy grew at a revised 4.9% annual pace in the third quarter, down from a previously reported 5.2%. It was still the biggest increase in a decade, excluding the pandemic years of 2020-21 — providing the world’s largest economy with a surprising burst of growth that has likely tapered off into the year-end.
Meanwhile, the Philadelphia Fed manufacturing index weakened further in December, falling to negative 10.5 from negative 5.9 in the prior month in a sign of further deteriorating conditions.
The bond market had rallied on Wednesday after data showed a surprising deceleration in U.K. inflation.
What strategists are saying
“Fedspeak has been exhausted for the year and efforts to convince investors that a March rate cut is just too soon will resume in the New Year,” said BMO Capital Markets strategists Ian Lyngen and Ben Jeffery.
“Not only is there little on the immediate horizon to inspire a rethink of the prevailing macro narrative, even a modest slowing of the real economy in the beginning of 2024 would only serve to reinforce the bond bullish price action,” they wrote in a note.
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