Tuesday - December 17, 2013, 11:00am ET

Current Trend Direction: Sideways

Float/Lock Bias: Carefully FloatingCurrent Price of FNMA 4.0% Bond: $103.41, +9bp

Tame inflation at the consumer level has helped to push Mortgage Bonds into positive territory ahead of the 2-day FOMC meeting that begins later this morning. There will be no headlines from the Fed today as the monetary policy statement will be delivered around 2:00pm ET tomorrow.

The Consumer Price Index (CPI) for November was unchanged, below the 0.1% expected, led lower by declining gas prices at the pump offsetting increases for electricity and fuel oil. Headline CPI year-over-year rose to 1.2% from 1%. Excluding food and energy, the Core CPI rose by 0.2% while the year-over-year was unchanged at 1.7%. The Bureau of Labor Statistics said that home and rent prices rose over the past year as demand for both increased. The lack of and potential easing of inflation pressures is a bit of a concern for the Fed and may give it cover to hold off tapering a bit longer. A symbolic taper is coming but it may not be until the Spring, once Janet Yellen gets her feet on the ground as Fed Chair.

Over in the foreclosure arena, Corelogic reported that 791,000 more residential properties returned to positive equity in the 3rd quarter of this year, but nearly 6.4 million mortgaged residential properties still have negative equity. In addition, there were 48,000 completed foreclosures in October 2013, a 30% year-over-year decline from 68,000 in October 2012. By comparison, prior to the decline in the housing market in 2007, completed foreclosures averaged 21,000 per month nationwide between 2000 and 2006. From September to October there was a 25.6% decline in completed foreclosures.

In housing, the NAHBs Housing Market Index jumped 4 points in December to 58, above the 55 expected as builders cited pent up demand for the increase.

We will continue to float into the Fed meeting today, as we don't see any major volatility. Traders will not be looking to add any big positions ahead of the monetary policy statement.

Joe Shamie NMLS # 241432

First Choice Loan Services NMLS # 210764

First Choice Bank NMLS# 177877

866-970-3400 x-5135

jshamie@fcbmtg.com