After closing Wednesday's session mostly unchanged in response to the Federal Reserve's monetary policy announcement, treasury bonds experienced an upward trend during Thursday's trading.
While bond prices retraced slightly after an initial surge, they maintained a strong positive trajectory throughout the day. Consequently, the yield on the benchmark ten-year note, which inversely correlates with its price, declined by 4.3 basis points, settling at 4.512 percent. This marked the ten-year yield's lowest closing level in over a month.
The rally in treasuries followed a report from the Commerce Department indicating that U.S. economic growth in the fourth quarter of 2024 fell short of economists' predictions. According to the report, the gross domestic product (GDP) rose by 2.3 percent during the fourth quarter, following a 3.1 percent increase in the third quarter. Economists had projected a 2.6 percent rise in GDP.
The Commerce Department attributed the GDP growth in the fourth quarter largely to advances in consumer and government spending, which were slightly counterbalanced by a decline in investment.
"Although fourth-quarter GDP growth fell below surface expectations, the economy concluded 2024 on a robust note," stated Will Compernolle, Macro Strategist at FHN Financial. "Domestic demand remains strong, inflation met expectations, and the substantial inventory reduction is not likely to persist into future quarters."
He further explained, "The Fed can review this report with cautious optimism, recognizing that inflation is not significantly accelerating and growth hasn’t dipped below potential."
In a separate release, the Labor Department revealed that first-time claims for U.S. unemployment benefits declined more than anticipated in the week ending January 25th. Initial jobless claims decreased to 207,000, down from the prior week's unrevised figure of 223,000, with expectations set at 220,000.
Attention is likely to turn to a forthcoming Commerce Department report on personal income and spending scheduled for Friday, which will include consumer price inflation data favored by the Federal Reserve.
