BOND REPORT: Treasury Yields Climb After U.S. Economy Posts Solid Fourth-quarter Growth Numbers

By FeaturesDow Jones Newswires

Fourth-quarter GDP rose to 2.6%, but below the 3.0% median forecast from economists polled by MarketWatch

Treasury yields on Friday rose, as investors sold government paper, after a solid reading of U.S. gross domestic product for the fourth quarter.

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How are Treasurys performing?

The yield on the benchmark 10-year Treasury note rose 2.6 basis points to 2.647%. The 2-year note yield added 3.6 basis points to 2.120%, while the 30-year bond yield was up 1.9 basis points to 2.899, with yields picking up after the biggest one-day decline since Dec. 27 in Thursday trade.

What's driving the markets?

A first reading of gross-domestic-product data for the fourth quarter of 2017 showed the U.S. economy GDP growth of 2.6% falls short of Wall Street's target. But the reading fell below the 3% growth rate by economists surveyed by MarketWatch.

See: Why the GDP report was a 'good miss' (http://www.marketwatch.com/story/why-the-gdp-report-was-a-good-miss-2018-01-26)

Nonetheless, the solid reading added to signs that a global economic upswing, which has lifted the S&P 500 , the Dow Jones Industrial Average and the Nasdaq Composite to repeated records in January. Corporate tax cuts and a broader increase to corporate spending spurred by pro-business policies, also has factored into growth expectations.

Increases to U.S. output could push the Fed to act more aggressively to tamp down a market and economy that by some measures is at lofty valuations.

Yesterday, investors also digested the European Central Bank decision to keep rates unchanged while acknowledging that the eurozone economy is gathering steam as a signal that the central bank may be gearing up to adopt a more hawkish posture.

What are strategists saying?

"In short, growth was a bit less than generally expected, disappointing hopes for a third consecutive 3%-or-better quarter for the first time since 2005, but the details were stronger than the headline figure," said Jim O' Sullivan, chief U.S. economist for High Frequency Economics.

What else is on investors' radar?

A downtrodden U.S. dollar (http://www.marketwatch.com/story/trump-boost-fades-for-dollar-as-investors-brace-for-gdp-data-2018-01-26), which lost some upward traction after President Donald Trump said he endorsed a strong dollar, has weighed on government paper as well. A weaker currency can make Treasurys less attractive to foreign buyers.

Durable goods climbed 2.9% in December (http://www.marketwatch.com/story/autos-airplanes-boost-orders-for-us-durable-goods-in-december-2018-01-26), well above the 0.9% increase predicted by MarketWatch economists. The strength of the number was attributed to stronger demand for airplanes and automobiles.

What are other assets doing?

The yield on the 10-year German bond , known as the bund, was at 0.618%, compared with 0.589%, according to FactSet data.

(END) Dow Jones Newswires

January 26, 2018 10:54 ET (15:54 GMT)

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