MBS Day Ahead: What’s In a GDP Report?


Posted To: MBS Commentary

GDP was hotly anticipated this week and rightfully so. The trading reaction has been the week's most volatile and has carried the most volume. Paradoxically, the 3.2% vs 2.0% reading resulted in a bond market RALLY (just the opposite of what anyone would expect from such a big beat). To understand why this is happening, we need to look more deeply into the nuances of the report. Warning ! The following table of data is obviously huge and potentially overwhelming at first glance. I've taken the liberty of highlighting a few key ingredients. The red circles are the main sub-headings of the GDP number. They add up to the 3.2% total (3.18% technically, but the report is always rounded to the nearest 0.1%). The red circles are unimportant for the purpose of our conversation today. I just…(read more)

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