U.S. Government Bonds Gain on GDP Qualms; Headline Reading of 3.5% Growth Masks Some Underlying Concerns
Treasury prices gained Thursday as investors kept their optimism about the U.S. economy in check despite a solid headline reading on last quarter's growth.</br></br>In late-afternoon trading, benchmark 10-year notes gained 6/32 in price to yield 2.305%. Two-year notes rose a fraction to yield 0.481%. Bond yields decline when prices rise.</br></br>Those gains came despite the U.S. reporting that gross domestic product grew 3.5% in the third quarter, surpassing expectations. Investors felt details to the report were less rosy, with typically volatile spending on defense boosting the reading, while the price index continued to show a lack of inflation.</br></br>"The internal mix of the GDP report was not as good as the headline suggests," said Andres de Lasa, a government bond trader at Pierpont Securities, adding that prices are reverting a bit higher after Wednesday's decline.</br></br>Mr. De Lasa said last session's declines came as investors placed new bets against Treasurys, particularly around the two- and five-year maturities, after a policy statement by the Federal Reserve showed increased optimism about the U.S. economy. While the central bank maintained that it will wait a "considerable time" before raising rates, for investors, the latest statement moves policy one step closer to tightening.