New orders for durable goods rose in June partially reversing the prior month's decline but contracting capital goods deliveries sent 10-year Treasury yields tumbling below 2.50 percent.
Overall placements for items designed to last more than three years jumped 0.7 percent last month, recovering more than half of the unrevised 1.0 percent drop in May, reported the Census Bureau today, and improving on the 0.5 percent forecast.
The non-military capital good category excluding aviation, an oft cited proxy for business investment, saw a 1.4 percent surge in June, almost triple the 0.5 percent expectation but the positive impact was more than displaced by 1.9 percent negative revision to May, dropped from 0.7 percent to -1.2 percent.
Goods orders outside the transportation sector, in practice minus the aircraft orders of Boeing Company of Chicago, increased 0.8 percent in June, a bit more than the 0.5 percent estimate for the Bloomberg survey of economist. May was unchanged at -0.1 percent.
Shipments of non-military capital goods excluding aircraft, a number used in calculating GDP, fell 1.0 percent in June, a large miss on the 1.3 percent forecast. Deliveries in this category have now fallen for the entire second quarter as May, initially reported at 0.4 percent was revised down to -0.1 percent today. Deliveries dropped 0.3 percent in April. It was the first fully negative quarter since the third quarter of 2001, and the worst three month total in five years.
The benchmark generic 10-year Treasury had been yielding 2.5043 percent just before the durable goods report. It promptly dropped 2 basis points and fell as much as 3.5 points to 2.4691 percent before recovering briefly to 2.4817 just after noon in New York.
The negative quarter for capital goods deliveries will likely incur downward revisions to analysts' second quarter GDP estimates, currently at 3.0 percent annualized in the Bloomberg survey, scheduled for release July 30th.
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