Wednesday - January 8, 2013, 10:30am ET

Current Trend Direction: Sideways near resistance

Float/Lock Bias: Start the day floating, but be ready to lock

Current Price of FNMA 4.0% Bond:$103.31,-16bp

The first big risk event of the week pushed Bond prices lower this morning after employers added more private jobs than expected in December. The 4% coupon did close above resistance at the 25-day Moving Average yesterday, but it has been pushed back to this level after the news.

ADP Reported that there were 238K private jobs created in December, above the 203K and more than the 215K created in November. Job gains were broad based across most industries with a heavy concentration in construction and manufacturing...a good sign. With Fed tapering being data dependent, this healthy report sets the stage for more further cuts into QE3.

The next hurdle today will be the Fed Minutes from the December 18 FOMC Meeting and the details on tapering could also be a risk factor when they are released at 2:00pm ET. Throw in today's $21B 10-Year Note offering and you have a recipe for ramped up volatility.

Yesterday, San Francisco Fed President John Williams said that he supports the decision to taper the Bond buying program and that he expects to reduce the purchases this year and eliminate the program by the end of 2014. If the economy continues to expand and inflation perks up you should expect QE3 to continue to wind down.

Prices are trying to stabilize above the 25-day MA, but technicals will take a back seat to all the news items. Locking late yesterday was smart in advance of this mornings surprise ADP release. On new transactions taken this AM start the day floating but prep clients that they may have to lock later today when the auction results or Fed Minutes are released.

Looking even further ahead all clients should be prepped to lock in advance of the Jobs Report.

Joe Shamie NMLS # 241432

First Choice Loan Services NMLS # 210764

First Choice Bank NMLS# 177877

866-970-3400 x-5135

jshamie@fcbmtg.com