What’s Up With Stronger Bonds Despite Stronger GDP?

We’re not huge fans of the GDP report as a consistent market mover for bonds/rates, but if any GDP release has a chance, it’s the “advance” (which is the first of 3 releases for any given quarter).  Today’s was quite a bit higher than the median forecast (3.3 vs 2.0).  If the market were truly interested in reacting to the economic implications of that number, we likely would have seen yields move higher.  Instead, bonds rallied.  While there were other components of the report that were more bond friendly as well as other economic reports that were more downbeat, traders were at least as interested in the spillover from European trading as today’s ECB announcement was seen as more dovish than expected.

Econ Data / Events

Jobless Claims

214k vs 200k f’cast, 189k prev

Durable Goods

0.0 vs 1.1 f’cast, 5.5 prev

Q4 GDP

3.3% vs 2.0 f’cast

GDP Deflator

1.5 vs 2.3 f’cast

Market Movement Recap

08:43 AM Modestly stronger after 8:30am econ data. 10yr down 4bps at 4.14%.  MBS up about 1 tick (.03) after accounting for illiquidity. 

11:06 AM resilience remains with help from Europe.  10yr down 5.2bps at 4.128.  MBS up 6 ticks (.19).

12:20 PM Some weakness in Treasuries, but not spilling over to MBS.  10yr down 3.7bps at 4.143.  MBS up 7 ticks (.23).

02:30 PM Holding near best levels after decent 7yr auction.  10yr down 5.4 bps at 4.126.  MBS up 7 ticks (.23).

Published On: January 25, 2024 / Categories: Mortgage News /