Fourth-quarter U.S. GDP up just 1.4%, badly missing estimate

While yields were moving lower prior to the print, the 10-year yield is now hovering at 4.06% and the 2-year at 3.46%—both higher than the previous week's lows—despite the massive GDP miss. Typically, a 1.4% GDP print (vs 2.8% exp) would send yields crashing as traders price in a recession. However, the "hot" inflation data (Pricing Index 3.6%) is keeping a floor under yields. The bond market is trapped in a tug-of-war between recessionary growth (bullish for bonds) and sticky inflation (bearish for bonds). Watch yields closely. The lack of a rally in bonds (drop in yields) on such weak growth news indicates the market is deeply worried about inflation persistence. A revision in the data or Fed commentary prioritizing growth over inflation could cause a sharp move in either direction.