Bond Yields Rise after Weak First Quarter GDP

May 4, 2015

Bond Yields Rise after Weak First Quarter GDP Photo

Mixed economic data and the Fed meeting led to an increase in bond yields last week, as the 10 year Treasury broke out of its near-term range. The 10 year Treasury yield increased by approximately 20 basis points (bps) last week while the equity market was roughly unchanged. U.S. first quarter Gross Domestic Product (GDP) rose 0.2% in the first quarter, which was weaker than consensus estimates of 1.1%, confirming that the slowdown in the economy was significant. GDP is a lagging indicator and because the slowdown was expected, it was widely discounted by the markets.

The Fed ended its two day policy meeting with an uneventful statement. It does appear the Fed will look for the strength in the recovery of the economy to determine the timing of the Fed increase. Reading between the lines in the statement, it does appear the Fed will increase rates in 2015.

In the week ahead, the key economic data will be Friday's April employment number. We expect housing to show a rebound from the weak data in March. Also in the week ahead, we expect global bond yields to continue to rise and the 10 year Treasury yield should test the year-to-date high of 2.24%. Any sustained move above this level could signal a more significant increase in yields.

Tags: Monday Morning O'Malley | Federal Reserve | 10-Year Treasury | GDP | Employment numbers | Housing numbers

< Go to Monday Morning Perspectives

This blog post is for informational use only. The views expressed are those of the author(s), and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.

Any statements about financial and company performance of The Penn Mutual Life Insurance Company or its insurance subsidiaries (each, “Client”) made by the author is provided with a written consent from the Client.  Penn Mutual Asset Management is a wholly owned subsidiary of The Penn Mutual Life Insurance Company.

Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice.  The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete.  Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements.  Actual results may differ significantly.  Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.

Investing involves risk, including possible loss of principal.  Past performance is no guarantee of future results.  All information referenced in preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. There is no representation or warranty as to the accuracy of the information and Penn Mutual Asset Management shall have no liability for decisions based upon such information.

High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.

All trademarks are the property of their respective owners. This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission.

Subscribe to Our Publications