U.S. government debt prices rose on Thursday after the preliminary GDP reading for the second quarter showed an economic contraction.
Shortly after 8:30 a.m. ET, the yield on the benchmark 10-year Treasury note slipped by about 1 basis points to 2.721%. The 2-year yield fell seven basis points to 2.899%. Yields move inversely to prices and one basis point is equal to 0.01%.
Second-quarter GDP slipped 0.9%, the Bureau of Economic Analysis said Thursday. This marked the second-straight negative quarter for GDP, a metric that has historically often coincided with economic downturns.
Though some on Wall Street use two-straight negative quarters of GDP as a shorthand definition for recession, U.S. recessions are officially designated by the National Bureau of Economic Research, which uses a more nuanced definition. Solid job growth during the first half of the year, and the impact of high imports on GDP, have led some to speculate that the NBER will not declare a recession during the first two quarters of 2022.
Meanwhile, the 30-year Treasury yield rose 4 basis points to 3.044%, though it has eased from where it traded before the release of GDP data.
Thursday’s market moves came after the Fed decided to raise interest rates by 75 basis points for the second month in a row to combat high inflation. Chairman Jerome Powell said the central bank will be making rate hike decisions on a meeting-by-meeting basis.
In addition, the Fed also said the U.S. economy is not in recession as “there are just too many areas of the economy that are performing too well.” The comments pushed U.S. stocks higher during Wednesday’s session.