US Treasury Yields Increase Following Surprising GDP Growth
WHAT YOU SHOULD KNOW
- The U.S. economy was in good condition at the end of 2022, as indicated by the release of a report that showed a 2.9% annualized rate of fourth-quarter gross domestic product (GDP) growth.
- The Labor Department also released a report indicating that initial claims for state unemployment benefits had decreased by 6,000.
- The Commerce Department reported a dramatic increase in new orders for U.S. manufactured durable goods in December.
After the release of a report indicating the US economy was in good condition at the end of 2022, U.S. Treasury yields dropped while major stock index futures rose, despite the looming threat of a recession.
The Commerce Department reported on Thursday that the fourth-quarter gross domestic product (GDP) increased at an annualized rate of 2.9%. GDP is the total value of all goods and services produced in the October-to-December period.
According to a survey conducted by Dow Jones, economists predicted that the reading would be 2.8%. The data indicated that the quarterly growth rate was slightly lower than the 3.2% rate seen in the preceding quarter. Consumer spending was once again the driving force behind the economy, as it increased by 2.1% during the period.
Despite a slight decrease from the previous period’s 2.3%, the most recent period still saw a positive result.
The report’s second section revealed a significant decrease in inflation readings. The personal consumption expenditures price index rose 3.2%, which was in line with expectations but significantly lower than the 4.8% increase seen in the third quarter. The chain-weighted index, not including food and energy, increased by 3.9%, a decrease from 4.7%.
On Thursday, the Labor Department released a report indicating that initial claims for state unemployment benefits had decreased by 6,000 to a seasonally adjusted 186,000 for the week ending January 21st. The number of people receiving unemployment benefits rose by 20,000 to 1.675 million in the week ending January 14th, indicating an increase in hiring.
According to a report released by the Commerce Department on Thursday, December saw a dramatic increase in new orders for US manufactured durable goods, far exceeding expectations. In December, the Commerce Department reported that durable goods orders had increased by 5.6 percent, following a 1.7 percent decrease in November. Economists anticipated that orders for durable goods would increase by 2.5 percent, in contrast to the 2.1 percent decrease that was reported the prior month.
After the reports were released, the yields of Treasury bonds increased, indicating that traders may still have some reservations about whether the Federal Reserve will raise the interest rate by 25 or 50 basis points at the upcoming meeting. The evidence suggests that the Federal Reserve may still have the ability to increase its terminal rate beyond 5.0%, or even after June.
Despite the increase in yields, the main US stock index futures are still at their peak, indicating a higher opening in the cash market
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