Much stronger than expected GDP and Chicago PMI data weighed on Treasuries from just after the opening bell. Indeed, most of the rest of the session was spent digesting those losses, while equity weakness in the Nasdaq provided some support. Yet, the contract rolled over into the close and ahead of another heavy round of data releases slated on Friday.
Treasuries kicked off the session under mild pressure as traders booked profits from yesterday's solid gains. Profit taking accelerated, however, as Q4 GDP was revised higher to +1.4%, well above expectations in the 0.5% area. That isolated the Q3 2001 drop, leaving it to be the only negative quarter since the 1991 recession. Economists are beginning to look for robust growth in Q1 due to the surprisingly solid Q4 sales growth and an equally surprising collapse in inventories. Treasuries extended their losses following the release of the Chicago PMI, which jumped to 53.1 in February from 45.1. This is the first time since July 2000 that the index has been above the 50 threshold, indicating expansion.