Cause and effect: Slightly lower GDP growth=small drop in Treasury yields=move up in stock prices

Cause and effect: Slightly lower GDP growth=small drop in Treasury yields=move up in stock prices

Today the second estimate of U.S. GDP growth came in slightly below projections. But that lower than expected growth rate sent Treasury prices up—and yields down—in today’s auction. That in turn has been good for U.S. stocks, as it has reduced anxieties about any early tapering off of the Federal Reserve’s monthly purchase of $85 billion in Treasuries and mortgage-backed securities.

A tentative stability in Tokyo today

The recovery in Japanese stocks and the renewed downturn in the yen are hardly strong trends at the moment. I think you can say that the Bank of Japan and traders’ forecasts of what the bank will do have stabilized the yen and Japanese stocks, but that the stability is tenuous and depends on news/rumor/sentiment about the Federal Reserve and on yields in the market for Japanese government bonds.