Bond Market Update

Data Recon

• Real GDP increased at an annual rate of 4.3% in the third quarter (Briefing.com consensus: 3.0%), paced by the contributions from personal spending and exports. The GDP deflator, meanwhile, increased 3.8% (Briefing.com consensus: 2.7%) following a 2.1% increase in the second quarter.
  • The key takeaway from the report is that the U.S. economy was certainly running on the warm side in Q3. That will stir some concerns about the Fed's recent decision to cut rates in December and the risk of stoking increased inflation in pursuit of keeping the economy on a growth trajectory.
• Durable goods orders declined 2.2% month-over-month in October (Briefing.com consensus: 0.3%), with transportation equipment orders (-6.5%) acting as the drag. Excluding transportation, durable goods orders increased 0.2% month-over-month (Briefing.com consensus: -1.1%) following an upwardly revised 0.7% increase (from 0.6%) in September.
  • The key takeaway from the report is that it was a better indicator of growth than meets the headline eye, evidenced by the 0.7% month-over-month increase in shipments and 0.5% month-over-month increase in new orders for nondefense capital goods excluding aircraft.
• Yield Check:
  • 2-yr: +2 bps to 3.53%
  • 3-yr: +3 bps to 3.59%
  • 5-yr: +3 bps to 3.75%
  • 10-yr: +2 bps to 4.19%
  • 30-yr: +1 bp to 4.85%