Bond Market Update

Data Recon

• The Advance Q1 GDP report showed real GDP increasing at an annual rate of 2.0% (Briefing.com consensus: 2.1%) versus 0.5% in the fourth quarter. The GDP Chain Deflator was up 3.6% (Briefing.com consensus: 3.3%) following a 3.7% increase in the fourth quarter.
  • The key takeaway from the report is that the growth was driven by gross private domestic investment, which contributed 1.48 percentage points, and personal consumption expenditures, which contributed 1.08 percentage points to the GDP increase. Not to be overlooked, though, is that the PCE price index was up 4.5%, while the core PCE price index was up 4.3%.
• The Q1 Employment Cost Index increased 0.9% (Briefing.com consensus: 0.8%) on the heels of a 0.7% increase in Q4, with wages and salaries up 0.8% and benefit costs up 1.2%.
  • The key takeaway from the report is that the increase in wages and salaries for civilian workers over the last 12 months (3.4%) is barely running ahead of inflation.
• Initial jobless claims for the week ending April 25 decreased by 26,000 to 189,000 (Briefing.com consensus: 217,000). Continuing jobless claims for the week ending April 18 decreased by 23,000 to 1.785 million.
  • The key takeaway from the report is the strikingly low number of initial claims. That just isn't consistent with a labor market that is falling apart—far (very far) from it.
• Personal income for March increased 0.6% month-over-month (Briefing.com consensus: 0.4%) following an upwardly revised unchanged reading (from -0.1%) for February. Personal spending jumped 0.9% month-over-month (Briefing.com consensus: 0.4%) following an upwardly revised 0.6% increase (from 0.5%) in February. The PCE Price Index increased 0.7% month-over-month (Briefing.com consensus: 0.6%), leaving it up 3.5% yr/yr versus 2.8% in February. The core PCE Price Index rose 0.3% (Briefing.com consensus: 0.3%), leaving it up 3.2% yr/yr versus 3.0% in February.
  • The key takeaway from the report is that spending has remained solid in the face of stubbornly high inflation—a dynamic that is going to leave the Fed disinclined to cut rates.
• Yield Check:
  • 2-yr: -4 bps to 3.89%
  • 3-yr: -4 bps to 3.91%
  • 5-yr: -5 bps to 4.02%
  • 10-yr: -4 bps to 4.38%
  • 30-yr: -2 bps to 4.97%