Wednesday - November 20, 2013, 11:00am ET

Current Trend Direction: Topped out at 200 DMA

Float/Lock Bias:Carefully FloatingCurrent Price of FNMA 4.0% Bond: $105.00, +22bp

After failing to break above resistance at the 200-day Moving Average yesterday, the 4% coupon is knocking on the door of the 200 DMA once again.

Inflation remained tame in October as the Consumer Price Index (CPI) fell by -0.1% versus the 0.0% expected due to the decline in energy prices. Core CPI, which strips out volatile food and energy, rose by 0.1%, below the 0.2% anticipated. On a year-over-year basis, the headline CPI was up 1%, the smallest increase since the fall of 2009. Core was up 1.7%, unchanged. These moderating inflation numbers are a concern and gives the Fed all the reason in the world to keep QE3 pumping.

Due to the decline in prices at the pump, consumers spent less on gas and splurged on clothing and electronics in October. Retail Sales rose by an unexpected 0.4% when the Street was looking for an increase of just 0.1%. When stripping out autos, sales were up 0.2% versus the 0.1% expected. This was an OK number and highlights how the consumer will spend more if they have more.

Outgoing Federal Reserve Chairman Ben Bernanke didn't offer any surprises last night in a speech at the National Economic Club in D.C. Mr. Bernanke said that easy money policy (Fed Funds Rate) will stay low for as long as needed and the Fed will only begin to taper Bond buying once it is assured that the improvements in the labor markets would continue. We agree and don't see a pullback in buying this year.

Existing Home Sales fell 3.2% in October. The Fed minutes will be released around 2:00pm ET.

Technically, the Bond is resting just below resistance at the 200-day Moving Average. We are starting the day carefully floating.

Joe Shamie NMLS # 241432

First Choice Loan Services NMLS # 210764

First Choice Bank NMLS# 177877

866-970-3400 x-5135

jshamie@fcbmtg.com