Monday - November 25, 2013, 11:20 am ET

Current Trend Direction: Sideways

Float/Lock Bias:Cautiously FloatingCurrent Price of FNMA 4.0% Bond: $104.59, +6bp

"Mortgage Bonds start this holiday shortened week higher as Traders continue to ponder when the Fed will start to taper QE3. There is no historical reference as to how completely Fed driven the markets have become. The Fed "escaping" QE will not be a "safe" path and there is simply no easy exit when you kick the can into a dead-end like the Fed has done. In addition to many dissidents within the Fed itself, there are a growing number of people concerned about the true efficacy of QE on the economy. The economy limps along but Stocks are at record highs - they can't stay disconnected forever. Either the economy starts really growing or Stocks will take it on the chin once the tapering begins. Yes, meaning that Bonds could actually benefit once tapering starts.

Giving a boost to Stocks is Iran agreeing to reduce nuclear activities in return for some oil sanctions being eased. Hate to be cynical or a "dissident" here, but negotiating with Iran will probably not work out in our interests.

Pending Home Sales just came out worse than expected and gave Bonds a boost to their best levels of the day.

The continued rise in Stocks coupled with the added supply of a total of $96B in 2, 5 and 7 Year Notes today, tomorrow and Wednesday could cap limit Bond gains this week.

Technically, the 4% coupon is trading just below resistance at the 50-day Moving Average. Start by floating.

Joe Shamie NMLS # 241432

First Choice Loan Services NMLS # 210764

First Choice Bank NMLS# 177877

866-970-3400 x-5135

jshamie@fcbmtg.com