Treasury Market Steady Despite GDP Contraction and Rising Jobless Claims

Treasury yields held stable on Thursday despite two concerning economic reports.

First, the U.S. economy contracted at a 0.3% rate in Q1 2024—its first decline in three years.

Second, weekly jobless claims rose to 241,000, exceeding economists’ expectations of 225,000. The benchmark 10-year Treasury yield dipped slightly to 4.148%, while the 2-year yield fell to 3.582%.

The GDP decline was largely driven by surging imports (ahead of President Trump’s April tariff order) and reduced federal spending, while consumer spending grew at just 1.8%. Inflation data was mixed, with the Fed’s preferred measure (PCE index) showing a quarterly increase but remaining flat for March.

Market participants don’t expect any rate cuts at next week’s Federal Reserve meeting but still anticipate cuts beginning in June, as recent bond market trends suggest concerns about economic growth slowing.