Treasury yields held relatively flat on Friday as investors assessed a week of significant economic data releases and policy decisions. The 10-year U.S. Treasury note yield dipped marginally to 4.386%, while the 2-year Treasury note edged down to 3.884%.
Thursday's Commerce Department report revealed a 2% growth in first-quarter gross domestic product (GDP), a rise from the previous quarter's 0.5% but falling short of the anticipated 2.2%. Art Hogan, chief market strategist at B. Riley Wealth, attributed the lower-than-expected figure to supply shocks stemming from ongoing conflict in the Middle East, warning of potential for slower expansion if the situation persists.
Inflation data also presented a mixed picture. The personal consumption expenditures (PCE) price index, the Federal Reserve's preferred inflation gauge, increased by 0.7% in March, resulting in a 3.5% annual inflation rate – aligning with Wall Street expectations. However, core PCE, excluding volatile food and energy prices, rose by a more moderate 0.3% month-over-month and 3.2% year-over-year.
The Federal Reserve maintained its benchmark federal funds rate within the 3.50% to 3.75% range, as widely predicted. Simultaneously, the Trump administration faces a 60-day deadline under the War Powers Resolution regarding military action in Iran, with arguments being made that a recent ceasefire has "terminated" hostilities and negates the need for Congressional approval.
Adding to the global economic landscape, Bank of England Governor Andrew Bailey cautioned about the "very uncertain" outlook for energy prices and the potential for sustained price increases to embed inflation. The Bank of England's Monetary Policy Committee voted 8-1 to hold the Bank Rate at 3.75%, but Bailey indicated a willingness to act if energy price pressures become persistent.
