Bond Market Update

Data Recon

• Q4 GDP was revised down to 0.7% (Briefing.com consensus 1.4%) from the advance estimate of 1.4%. The GDP Price Deflator was revised to 3.8% from 3.6% in the advance estimate.
  • The key takeaway from the report is that growth decelerated notably in Q4 while the Price Deflator was revised higher, which is a disappointing combination.
• Personal Income increased 0.4% month-over-month in January (Briefing.com consensus 0.4%) after rising 0.3% in December. Personal spending was also up 0.4% month-over-month (Briefing.com consensus 0.2%) following a 0.4% increase in December. The PCE Price Index rose 0.3% month-over-month (Briefing.com consensus 0.3%), while the core PCE Price Index, which excludes food and energy, rose 0.4% month-over-month (Briefing.com consensus 0.4%). On a year-over-year basis, the PCE Price Index increased 2.8% versus 2.9% in December, and the core PCE Price Index increased 3.1%, versus 3.0% in December.
  • The key takeaway from the report is that the Fed's preferred inflation measure, the core PCE Price Index, edged up in January, which presents a headwind to rate cut expectations.
• Durable goods orders were flat month-over-month in January (Briefing.com consensus 0.7%). Excluding transportation, durable goods orders rose 0.4% month-over-month (Briefing.com consensus 0.5%) after increasing a revised 1.3% (from 0.9%) in December.
  • The key takeaway from the report is that the flat headline reading masked a solid 0.9% increase in nondefense capital goods orders, which is a proxy for business investment.
• Yield Check:
  • 2-yr: -6 bps to 3.70%
  • 3-yr: -6 bps to 3.72%
  • 5-yr: -5 bps to 3.84%
  • 10-yr: -3 bps to 4.25%
  • 30-yr: UNCH at 4.88%