Treasuries Move Back To The Upside Following GDP Data

(RTTNews) - After ending the previous session modestly lower, treasuries moved back to the upside during the trading day on Friday.

Bond prices pulled back off their best levels going into the close but remained in positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.9 basis points to 2.505 percent.

Treasuries moved higher early in the session as traders reacted to the Commerce Department's preliminary reading on first quarter GDP.

While the report showed an unexpected acceleration in GDP growth in the first quarter, economists expressed concerns about the underlying data.

The Commerce Department said real gross domestic product jumped by 3.2 percent in the first quarter after climbing by 2.2 percent in the fourth quarter of 2018.

The acceleration in the pace of growth came as a surprise to economists, who had expected GDP to increase by 2.1 percent.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said the much stronger than expected GDP growth would seem to "make a mockery of claims that the U.S. economy is slowing as the fiscal stimulus fades."

"After all, 3.2% is well above the economy's 2% potential pace and the 2.2% gain in the final quarter of last year," Ashworth said. "Looking beyond the headline number, however, there are plenty of causes for concern."

Ashworth predicted positive contributions from net trade, inventories and highways investment will all be reversed in the coming quarters and continues to expect overall growth to slow this year

The Federal Reserve will move into the spotlight next week, with the central bank due to announce its latest monetary policy decision on Wednesday.

While the Fed is widely expected to leave interest rates unchanged, the accompanying statement and Fed Chairman Jerome Powell's subsequent press conference are still likely to attract attention.

Traders are also likely to keep a close eye on the monthly jobs data as well as reports on personal income and spending, consumer confidence, pending home sales, and manufacturing and service sector activity.