Severe plastic shear deformation is invoked to produce submicrocrystalline Pd specimens. Over a temperature interval between 300 and 1225 K, annealing is performed to investigate the influence of microstructure on microhardness and magnetic susceptibility. On annealing over a temperature range between 475 and 600 K, deformed palladium exhibits an abrupt decrease in microhardness as measured at ambient temperatures, An analysis is made of the essential excess of the susceptibility of deformed palladium over that of the initial polycrystalline palladium, an excess that persists after deformed palladium has been annealed at T _< 825 K.