What's going on and why does it matter?
Today's durable goods and GDP numbers came out stronger than market expectations, while core PCE inflation is higher than it's been in quite some time. This continues to lay the groundwork for a Fed rate hike in June, and the unwinding of their massive mortgage bond buying program at some point this year. This news would normally cause bond prices to decline and mortgage pricing to get worse, which may very well happen being that mortgage bonds are trading near the top of their recent range.
However, the market's reaction may be tempered today for three reasons. First, the Fed's likely reaction may already be priced in to current market prices. Second, the Washington DC drama seems to be rekindling on reports that the FBI was looking into President Trump’s son-in-law Jared Kushner’s interactions with Russia. Third, financial market investors may be extra cautious ahead of the long 3-day weekend. The Fed is scheduled to purchase up to $1.2 billion of GNMA mortgage bonds this morning. The bond market closes early today and it's closed on Monday for the Memorial Day holiday.
What should you do about it?
Lock your rate to be safe, especially while mortgage bonds continue to trade near the top of their recent range.