30-Yr Yield Creeps Above 3.00%
- U.S. Treasuries ended Thursday with losses across the curve after failing to sustain a rebound that developed after a lower open. The market started the day in negative territory and tried to bounce after the release of a weak preliminary productivity reading for the fourth quarter (actual -0.1%; Briefing.com consensus 1.0%), which was coupled with a larger than expected increase in preliminary unit labor costs (actual 2.0%; Briefing.com consensus 1.0%). The ensuing bounce briefly lifted the 2-yr note into the green while 10s and 30s approached their flat lines, but could not turn positive, falling to fresh lows into the close. The afternoon wave of selling lifted the 30-yr yield above the 3.00% mark for the first time since May while the 10-yr yield finished at its highest mark since early April 2014. The Atlanta Fed's GDPNow model was a point of conversation during the day after the model was revised up to forecast Q1 growth of 5.4% (from 4.2%) following today's ISM Manufacturing Index. While growth of more than 5.0% would make for the sharpest increase since Q3 2014, it is worth noting that the ISM Manufacturing report is notorious for overstating its relationship to real GDP growth. Today's report claimed that the January reading of 59.1 corresponds to an annualized 4.9% real GDP growth. For reference, the December ISM report claimed that the average PMI of 57.6 that was recorded between January 2017 and December 2017 corresponded to real GDP growth of 5.2%. BEA data, meanwhile, shows that real GDP grew 2.3% in 2017.
- Yield Check:
- 2-yr: +2 bps to 2.16%
- 5-yr: +4 bps to 2.56%
- 10-yr: +5 bps to 2.77%
- 30-yr: +6 bps to 3.01%