A surprise upward revision in first-quarter gross domestic product figures pushed Treasuries lower Friday while municipals idled ahead of the Memorial Day weekend.

"It's closed," one trader said of the market just before 2 p.m., eastern daylight time. Observed a second trader. "Absolutely nothing going on institutionally and nothing going on in retail trading." The Treasury market officially closed at 2 p.m.

If trading had been more active, municipals probably would have been lower, the trader said, but action was so thin tax-exempts may as well have been judged unchanged.

Friday's June MOB spread was negative 391, compared to negative 392 on Thursday. In debt futures, the June municipal contract closed down more than 1/4 point at 91 26/32.

Earlier Friday, when the government market was down roughly 3/4 point following the GDP report, one trader said the municipal market was also lower by about 1/2 point. While municipals didn't lose as much because they generally lag Treasuries and Friday was a pre-holiday session, technicals also helped, the trader said.

"I think the technicals are holding it together right now," he said.

The government's 30-year bond eventually rebounded to end more than 1/4 point lower to yield 7.38%.

"We sold off after GDP," said Brian S. Wesbury, chief economist at Griffin, Kubik, Stephens & Thompson Inc.

The economy grew at an annual rate of 3.0% in the first quarter, faster than the 2.6% gain the Commerce Department reported last month.

Economists had been expecting a slight downward revision to 2.4%. While Wesbury's prediction of a 2.9% rise in GDP came closer to the mark than most, it was still shy.

Wesbury said the "nature and the size of the revisions" were alarming for the bond market.

"Revised increases in personal consumption and government purchases of goods and services lowered inventories, which suggests production will stay strong in the months ahead," Wesbury said.

For instance, non-defense federal spending, which originally showed a 7.6% decline, was revised to an 18.3% gain.

Total government purchases, originally given as down 6.2%, were revised to down just 3.6%. Personal spending, which had originally been given as up 3.8%, was revised to up 4.6%.

"It looks like consumption was much stronger than we thought," Wesbury said. "The bond market definitely didn't like that."

The fixed weight price deflator was up 3.1%, instead of up 2.9% as reported earlier. While that jump is not dramatic, it does indicate that inflation is building.

Federal Reserve Chairman Alan Greenspan said Friday that the Fed's rates hikes were justified and that long-term rates would have gone up even without the a Fed tightenting.

"He's absolutely right," Wesbury said. "The Greenspan comments and the GDP numbers point to the same thing -- that the economy is doing much better than people thought."

This week, the main economic indicator will be the May employment released on Friday.

Economists polled by The Bond Buyer generally expect an increase of 275,000 non-farm jobs for the month, with 15,000 of those jobs coming from the manufacturing sector. The civilian unemployment rate is expected to remain steady at 6.4%.

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