This quick take won’t win me any awards for riveting storytelling, but I’d be totally remiss not to flag the rather dramatic reaction in US rates to Thursday’s macro data out of the world’s largest economy.

To be sure, a hawkish trade / rates selloff was intuitive. It was the scope of the move that raised eyebrows.

The final estimate of Q1 GDP, backward-looking though it obviously is, was a bit of a shocker. If you missed the numbers, which included a big upside surprise on the personal consumption revision, I’d encourage you to peruse my summary here.

A very large decline in weekly jobless claims (the biggest single-week drop since October of 2021) suggested three weeks of elevated prints might’ve been yet another false alarm for the bulletproof labor market. Taken with multi-standard deviation surprises on new home sales and Conference Board confidence released earlier this week, the message was clear: The US economy is sturdy.

Treasurys reacted violently in a front-end and belly-led selloff that saw five-year yields rise by nearly 20bps at one juncture, flattening the 5s30s sharply.

As you can imagine, the July Fed meeting is now all but fully priced. Terminal is now seen at 5.45%. Two days of hawkish commentary from Jerome Powell’s sojourn in Europe helped cement expectations.

If you’re wondering whether the above is an overreaction (from markets, I mean), the answer is probably. At least from a near-term perspective. As discussed here first thing Thursday morning, the jury is still out on the longer run, though.

“It’s not typical that GDP revisions and jobless claims are enough to inspire a nearly 20bps increase in five-year yields, but Thursday’s session exemplified that at present, Treasury market dynamics are anything but typical,” BMO’s Ben Jeffery and Ian Lyngen wrote, in a characteristically incisive summary. “If there was a lesson to be learned from the price action, it is that the pain trade in rates remains the bear flattener.”