Tuesday - January 28, 2014, 10:25am ET

Current Trend Direction: Sideways to Higher, just beneath resistance at the 200-day Moving Average

Advise Your Clients:Floating into Fed statement

Current Price of FNMA 4% Bond: 104.22, Unchanged

Thanks to a not-so-durable Durable Goods report - Mortgage Bonds have been able to bounce from earlier losses to unchanged levels. Prices still remain beneath a tough resistance layer at the 200-day Moving Average.

December Durable Orders fell by 4.3%, well below the +2.1% expected, while November was revised to 2.6% from 3.4%. Declines were seen in transportation equipment, primary metals, computers and electronic products and capital goods and was the biggest decline since July. The weak report comes after yesterday's lower than expected reading from New Home Sales. Not great timing for such weak reports, since the Fed already started tapering. Of course the Fed members will be discussing the recent round of weak reports but it is still likely to taper QE3 by another $10B.

Later this morning, Consumer Confidence will be released, then at 1:00pm ET, the Treasury will announce the results of a $32B 2-Year Note auction.

The Fed kicks off its regularly scheduled 2-day FOMC meeting this morning on Capitol Hill, but there will be no headlines today. The monetary policy statement will be released at 2:00pm ET tomorrow and it is expected that there will be no change to the Fed Funds Rate, currently at 0.25%, just where it has been since December 2008. The big question will be whether or not the Fed will continue to taper its massive QEIII program, which has the Fed currently purchasing $75B per month in Treasury and Mortgage Backed Securities, down from the original $85B. As mentioned, there is still a good chance that the Fed will continue to taper. And if this is the case Bonds, after a knee-jerk move lower may actually improve over time. After the last taper on Dec 18th Bonds have since improved by over 100bpbring on the taper.

We are starting the day floating and seeing if we can hold that position into the Fed announcement tomorrow afternoon. It will take a lot to push Bonds above the 200-day MA but if there is any event that can do so, it is a Fed Meeting. Stay Tuned.

Joe Shamie NMLS # 241432

First Choice Loan Services NMLS # 210764

First Choice Bank NMLS# 177877

866-970-3400 x-5135

jshamie@fcbmtg.com