Merry Christmas to all those who celebrated this week! During the week of Christmas, financial markets typically move with the same energy of a post-gift-run Santa, lethargic at best. Despite the holiday lull, this week's economic calendar had a few releases worth noting.
On Tuesday, December the 23rd, third quarter Real GDP (GDP net of inflation) estimates were released by the Bureau of Economic Analysis (BEA). The Q3 Real GDP print of 4.3% came in rather hot and was 1.0% higher than the survey estimates of a 3.3% increase. The increase in Real GDP was driven by increases in consumer spending, net exports, and government spending. Within the consumer spending category, both the goods portion and the services portion registered increases, with healthcare serving as the leading contributor to services growth and recreational goods along with vehicles serving as the leading contributors to goods growth.
One of the components that drove GDP growth in Q3, according to the Bureau of Economic Analysis, was vehicle spending, but this category may not see the same continuation in Q4 given the weakness indicated in the U.S. Census Bureau's October Durable Goods Orders report, also released earlier this Tuesday. Actual Durable Goods Orders of -2.2% missed the -1.5% survey estimate by 0.7 percentage points. While this durable goods data falls outside the Q3 reference period, it suggests that vehicle spending may contribute less to GDP growth in future quarters than it did in Q3.
On the day before Christmas, the U.S. Treasury held an auction for the 7-year Treasury note that could signal tailwinds ahead for both notes and bonds heading into 2026. The Treasury auctioned $44 billion worth of seven-year notes, which attracted below average demand (bid-to-cover ratio of 2.51) and a high yield of 3.93%. Although the most recent 7-year auction paled in comparison to previous sales, the focus now shifts to the lack of coupon supply on the horizon. With no Treasury auctions scheduled until the second week of January, this supply vacuum could allow benchmark yields, particularly the 10-year note, to drift toward the lower end of its recently established 4.1%-4.2% range.
Have a great weekend everyone!
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Author
Carson Francis
Financial Analyst
The Baker Group LP
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