Wednesday - January 15, 2014, 12:40pm ET

Current Trend Direction: Lower

Float/Lock Bias:Continue locking. Current Price of FNMA 4.0% Bond: $103.47, -19bp

Multiple layers of overhead resistance, heated inflation at the wholesale level and a surge in manufacturing in the New York region has led Bonds lower so far today.

Adding to selling pressure in Bonds was better than expected earnings from Bank of America and the first quarterly dividend from General Motors post-bailout.

The Labor Department reported this morning that the Producer Price Index (PPI) for December rose for the first time in three months by 0.4% versus the 0.3% expected on higher gasoline and tobacco prices. When stripping out food and energy, the Core PPI jumped by 0.3% when expectations were calling for a 0.1% gain. However, the year-over-year PPI rose just 1.2%, while Core was up 1.4%, not much of a ramp up in the past 12 months. Bond prices are being pressured by the news as any hint of inflation spooks Bond investors.

Over in the manufacturing sector, the New York State Empire Index for January surged by 12.5 versus the 3.5 expected, hitting its highest level since May of 2012. The positive surprise news hurt Bonds.

The Mortgage Bankers Association reported that its Market Composite Index, a measure of total loan application volume, rose by 11.9% in the latest week, the refinance index gained 11.2%, while the purchase index increased by 11.5%.

Technically, as mentioned in yesterdays update and subsequent Lock alert, the Bond looked to be topping out. And topping out it has. The technical headwinds were very strong and they remain so. Locking still makes sense as the path of least resistance appears lower.

Joe Shamie NMLS # 241432

First Choice Loan Services NMLS # 210764

First Choice Bank NMLS# 177877

866-970-3400 x-5135

jshamie@fcbmtg.com