If you recall the previous two GDP reports, they were quite the anomaly. Q1 GDP rate, annualized actually fell -2.9%. Some economists blamed it on the harsh winter which certainly had some impact while others thought there was something amiss. -2.9% is quite a drop. One more quarter of that and we would haveQ3 gdp up officially been in another recession, going by the classic definition of one.

Then Q2 came out and ultimately reported 4.6% growth from the previous quarter, representing a 7.50% swing. Again, surely something’s not quite right.

Today however, the Commerce Department released the advance Q3 number which showed more growth by 3.5% over Q2, higher than the 2.00% many economists had expected. That sparked another rally and the Dow closed up 221.11 to settle at 17195.42. The S&P 500 nearly passed the 2000 mark closing at 1994.56 and the NASDAQ gained another 16.91 points to close at 4566.14.

The Fannie 30 year 3.5 coupon notched a 4/32 gain, closing at 103.13. 15 year fixed rates for single family investor properties can easily be found in the 3.25% range for conforming loans. Similar rates can be found for jumbo properties as well.

The Fed has ended QEIII but not without racking up another 3.4 trillion in holdings. Trillion with a “T.”  In 2007, the Fed’s balance sheet held 1.0 trillion in Treasuries and mortgage bonds and today that amount is approximately $4.4. Investors think the Fed will keep these holdings and repurchase them at maturity for some time before divestiture, helping to keep rates where they are. Once the Fed decides it’s time to sell, financing costs across the board will rise.