The U.S government bonds gained on Thursday after reading weak-than-expected Q1 Gross Domestic Product (GDP) figure. Also, bond yields were down as Federal Reserve voted to keep policy rates steady, while giving no signal for futures policy moves. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, moved tad down 0.11 pct to 1.858 pct and the yield on the 2-year Treasury bond dipped 2.35 pct to 0.821 pct by 1245 GMT.
The United States Q1 GDP rose 0.5 pct q/q (annualized), lower than the market expectation of 0.7 pct q/q, from 1.4 pct in the previous quarter. Similarly, personal consumption increased 1.9 pct, against market anticipation of 1.7 pct, from 2.4% in the last quarter of 2015. Moreover, exports tumbled 2.8 pct, from prior down 2 pct, alongside a 0.2 pct increase from imports. Business investments also decline 5.9 pct, alongside the deceleration seen in the headline measure, this report clearly reflects the weaker tone of data seen to open the year. Although a number of releases continue to reflect current economic dampness, the potential for a rebound in inventories in the months ahead should provide a boost to growth as we move further into 2016.
Federal Reserve officials on Wednesday left interest rates unchanged and provided no hint of a hike at the June meeting. Mixed global economic signals and low inflation combined with Brexit uncertainties probably clouding the move. Esther L. George was the lone dissenter, who preferred at this meeting to raise the target range for the federal funds rate to 1/2 to 3/4 percent.
In the statement that followed, the Fed didn’t send any message about when the next increase could come. Fed's cautious stance underscores policymakers' lack of confidence in moving away from extraordinary easy-money policies without undermining the fragile U.S. expansion and knocking the global economy off balance. Policymakers have made room till their June 14-15 gathering to see enough encouraging developments before they act.
The statement was marginally more positive, in line with economic data. The tone of the statement was unchanged but the Committee dropped hints on its worries and what's holding it back. It noted that data since March indicates that labor market conditions have improved further even as growth in economic activity appears to have slowed. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen. Meanwhile, S&P 500 Futures fell 0.67 pct to 2,076.75 by 1245 GMT.
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