Thursday - November 21, 2013, 9:53am ET

Current Trend Direction:Lower

Float/Lock Bias:LockingCurrent Price of FNMA 4.0% Bond:$104.19, -19bp

Mortgage Bonds continue to drift lower this morning after being pushed back from the 200-day Moving Average yesterday. Some optimistic news from the Fed minutes and possible fears of tapering, sooner rather than later, was the catalyst to push prices lower. Mortgage Bonds are having a tough time finding their feet and are lower still this morning.

The Labor Department reported that Weekly Initial Jobless Claims fell by 21K to 323K and below the 333K expected. It was lowest drop in nearly three months, but the decline could be due in part to the Veteran's Day holiday and could rise next week. The sector continues to have its problems and is a long way from full employment.

Inflation remained tame in October at the wholesale level. The Producer Price Index fell by -0.2%, in line with estimates, led by the decline in energy prices. Over the past 12 months, prices rose by a meager 0.3%, the lowest since the fall of 2009. The tame inflation will keep QE churning.

Reading the just released minutes from the most recent Fed meeting, it sounds like when the Fed starts reducing its monthly purchases of $85 billion in treasuries and MBS, the Fed will concurrently announce that it will keep short term interest rates abnormally low for a long time to reassure markets it will continue its very accommodative policies. My take: taper in March, Fed Funds near zero for years.

Hopefully you have been locking along with us once prices tested the 200-day Moving Average a few days ago. We feel that locking remains prudent, as the path of least resistance appears to be lower.

Joe Shamie NMLS # 241432

First Choice Loan Services NMLS # 210764

First Choice Bank NMLS# 177877

866-970-3400 x-5135

jshamie@fcbmtg.com