Treasuries gain but strong GDP threatens

Treasury debt prices edged higher on Thursday in volatile but mostly technical trade, although anxiety over a looming report on US gross domestic product kept bond bulls in check.
Most economists agree that third-quarter economic growth was more robust than the second quarter's 3.3 percent rate, but forecasts vary widely - from around 4 percent to well above 5 percent.
So much wiggle room means bond traders want to wait for hard data on Friday morning before discerning its implications for future monetary policy moves from the Federal Reserve.
"People are definitely wary of GDP," said Mary Ann Hurley, vice president of fixed-income trading at D.A. Davidson & Co in Seattle, Washington. A strong reading would reinforce the Fed's commitment to continue raising interest rates at a steady but gradual pace.
Most market participants view a November rate hike as a fait accompli, but estimates beyond that vary widely, depending on each analyst's perception of US economic prospects.
Soaring oil prices were a big question mark in predictions about growth and interest rates. But their retreat below $51 a barrel was little help to bonds, which have rallied strongly on the back of the recent energy surge.
In late afternoon trade, the benchmark 10-year note climbed 8/32 for a yield of 4.05 percent, down from 4.09 percent on Wednesday and still well above a seven-month low of 3.93 percent hit on Monday.
Helping Treasuries were lingering doubts about the future of the economy.
That, went the reasoning, would be a relief for the US economy and perhaps remove an impediment to further rate increases from the Fed. But later, traders reconsidered, noting that if the Chinese economy were to slow, it could ultimately crimp global growth, easing inflation pressures and thus helping fixed-income debt.
The back-and-forth left newly issued two-year notes yielding 2.58 percent, having fetched 2.59 percent in a poorly received $24 billion auction on Wednesday.
The five-year note was up 5/32 for a yield of 3.31 percent, down from 3.35 percent. The 30-year bond added 14/32, leaving yields hovering around 4.82 percent.