WASHINGTON -- Treasury notes and bonds rallied Friday after the government released its advance third-quarter gross domestic product report, which wasn't as bad as the market had feared.
The long bond climbed the better part of a point and was quoted at 94 19/32 late Friday, pushing the yield down to 7.97% from Thursday's 8.04%. Meanwhile, 10-year notes climbed about 1/2 of a point to 96 7/32, pushing the yield down to 7.80%.
GDP grew 3.4% on an annualized basis in the third quarter, the Commerce Department reported. Forecasts were clustered around 2.8%. But the market rallied because it was priced for a much bigger surprise on the up side, analysts noted.
"The 3.4% was at the high end of all forecasts, but it was very much priced into the market," said David Ader, managing market analyst of Technical Data in Boston.
Traders also focused on the unexpectedly low 1.6% gain in the implicit price deflator in the third quarter, down from 2.9% in the previous quarter.
A slightly stronger dollar against the yen and mark, and a modest decline in the Commodity Research Bureau index of commodity futures, added steam to the rally that analysts predicted would continue today.
Charles Blood Jr., director of financial market analyst at Brown Brothers Harriman & Co., said the rally would probably last into today, but described it as a bear-market rally -- in a market groping for signs of where the economy is headed.
treasury Market Yields Previous Prevous Friday Week Month3-Month Bill 5.09 5.11 4.656-Month Bill 5.68 5.65 5.421-Year Bill 6.19 6.16 5.922-Year Note 6.87 6.74 6.563-Year Note 7.08 7.04 6.865-Year Note 7.53 7.44 7.267-Year Note 7.70 7.62 7.4410-Year Note 7.85 7.77 7.6130-Year Bond 8.04 7.99 7.83
Source: Cantor, Fitzgerald/Telerate
Stock Market: The Dow Jones Industrial Average closed up 55.51 points Friday, at 3930.66.
Foreign Exchange: In late New York trading on Friday, the dollar was quoted at 97.25 Japanese yen and 1.5085 German marks.
Commodities: The Commodity Research Bureau's index closed down 0.48 point Friday, at 234.48.