Second quarter advanced GDP was released this morning and the report was surprisingly low. According to the release, the US economy only grew by 1.2%. This was significantly lower than the 2.6% expected. In addition, first quarter GDP was revised downward to just 0.8% from the originally reported 1.1%. This anemic level of growth clearly shows that things aren’t as rosy as many are led to believe. In fact, the US economy has averaged a 1% growth rate in 2016, and just 1.4% over the past four quarters. This isn’t too far off from a recession.
News as of late has been very friendly to mortgage bonds, helping to reduce the APR on mortgage interest rates over the past few days. Further, the 10 Year Treasury Note Yield has broken beneath its 25 day moving average. If it is able to maintain beneath this critical level, mortgage bonds could see continued gains. If the stock market turns lower, we could see bonds benefit further. We will have to watch closely and see how things play out.
With mortgage bonds continuing to move higher, there is no need to rush in to lock. Watch the markets closely and play it out for a short time to see if things improve further. If weakness develops, go ahead and lock in the gains of recent days.