Ready, Set, Lock!

Investors have plenty of news to digest this morning, with ADP Employment beating expectations, and GDP for Q2 reported at 1.7% – beating a very low target of 1.1%.  However, GDP for Q1 was revised lower from 1.8% to 1.1%.  The government has also revised GDP calculations.  Markets have reacted with stocks pushing higher and bonds moving lower for now, but the picture is subject to change this afternoon when the FOMC meeting concludes and monetary policy is announced.  Once again, the Fed is not expected to change anything with its rate policy, but the comments related to economic outlook could cause some knee jerk reactions either way.  Given the low revised Q1 GDP, and better but not great Q2 figure, dovish overtones would not be surprising.  mortgage bonds could use some help, as the move lower this morning has prices below the 25 DMA.  That will add some pressure to move interest rates higher, which in turn, is starting to impact one of the only bright spots in the economy – the housing market.  We switched to locking yesterday afternoon as bond prices deteriorated, but we will start today with a floating bias into the FOMC announcement this afternoon at 2 pm ET.  However, given the tremendous volatility surrounding Fed announcements lately, be ready to lock should the market perceive the comments as anti-QE3.

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