Big Rally After Big GDP Miss

We don’t often think much of GDP as a major consideration for the bond market, but today was a notable exception, partially because it was the first look at Q2’s numbers, partially because it fuels a debate about recession labelling, and mostly because it was a big negative number hitting a market that was expecting a moderately positive number.  Any way you slice it, GDP offered no objection to the recently gloomy shift in economic data.  Taken together with Powell’s allusions to a shift in the pace of rate hikes, it was enough to add emphasis to what were already strong levels in the bond market this week.

Econ Data / Events

GDP -0.9 vs +0.5 f’cast, -1.6 prev Jobless Claims 256k vs 253k f’cast, 261k prev

Market Movement Recap

09:25 AM Bonds rallying to best levels in more than 3 months after big miss in GDP.  10yr briefly 2.658, but now down “only” 10.5bps to 2.679.  MBS up half a point. 

12:16 PM Pulling back a bit from AM gains.  MBS still up 3/8ths to half a point, but down an eighth to a quarter since 11:30am. 

02:46 PM Off the weakest levels in MBS and fairly sideways for the past hour.  4.0 coupons still up more than half a point.  4.5s are close.  10yr yields are still down 9bps on the day, but well off the 2.65 lows at 2.70 currently.