Yields little changed by jump in GDP, fall in jobless claims

NEW YORK: Treasury yields shrugged on Thursday morning despite a headline jump of 33% in US third-quarter gross domestic product and a drop in jobless claims, as COVID-19 cases continued to rise globally and US election nerves kept traders from making big bets.

The American economy grew at a record pace in the third quarter as the government injected more than $3 trillion worth of pandemic relief, but the deep scars from the coronavirus recession could take a year or more to heal.

A separate report from the Labor Department on Thursday showed 751,000 people filed for state unemployment benefits in the week ending Oct. 24, compared to 791,000 in the previous period. Though claims have dropped from a record 6.867 million in March, they remain above their 665,000 peak seen during the 2007-09 Great Recession.

Longer-dated Treasury yields briefly rose following the reports, but quickly reversed the move. The benchmark 10-year yield was last up a basis points to 0.791%. The front end of the curve was anchored with the two-year yield up 0.2 basis point to 0.153%, steepening the yield curve by a basis point to 63.3 basis points.

"It's the largest GDP quarter on record after the smallest," said Justin Lederer, Treasury trader and analyst at Cantor Fitzgerald.

"I'm taking all the data in context these days. Even as the data has gotten better, here we are with COVID rising. And you have parts of Europe going into shutdown."

The European Union's biggest economies, Germany and France, announced new lockdowns overnight. Others among the 19 countries that use the euro are also shuttering much of their services sectors, a blow to the fledgling recovery. The European Central Bank signaled on Thursday that there would be more stimulus to come in December as the lockdown measures make a double-dip recession increasingly likely.

Lederer also noted that traders were unlikely to make large changes in positions before the Nov. 3 election. Though markets are betting that Democratic challenger Joe Biden will defeat President Donald Trump, high levels of mail-in voting may mean the uncertainty around the result as it is fought out in the courts if there is no immediate definitive result.