The last full week of trading in 2013 ends today as the Christmas holiday approaches. And looking ahead to next week, the Bond markets will be closing at 2:00pm ET on Christmas Eve, while Stock trading ends at 1:00pm. All capital markets are closed on Wednesday, December 25 in observance of Christmas.
Mortgage Bonds opened lower and pushed further into negative territory after a government report showed that economic growth grew faster than first estimated in the 3rd quarter of this year. But Bonds were able to shrug off the good news and roared back into positive territory.
The Bureau of Economic Analysis reported that the final reading on 3rd quarter Gross Domestic Product rose to 4.1%, above the 3.6% from the second reading and above the expectation of 3.6%. The 4.1% was the highest level since Q4 2011 of 4.9%. The rise was due in part to an increase in consumer spending to 2% from 1.4%, a buildup in business inventories and business spending in software. The Fed will need further confirmation from the Q4 numbers to confirm a more robust economy. We talked about the inventory build-up in the past and how this does positively skew GDP. Nonetheless, the economy does continue to improve.
Technically, the benchmark 4% coupon was able to bounce off a key support level at 102.66 each of the past 2 days and have since traded higher. We are going to continue to float with a finger close to the lock trigger. Remember, we do get those freak Fridays at times when Bonds simply suffer on Friday afternoon, - keep your eye on bond pricing just in case.