Thursday - February 20, 2014, 10:00am ET

Current Trend Direction: Sideways to lower, beneath support at the 200-day Moving Average

Float/Lock Bias: Start day carefully floating new filesCurrent Price of FNMA 4.0% Bond:$104.09, -6bp

Uncertainty surrounding yesterday's Fed minutes coupled with a breach below the Triple Lindy of support for the benchmark 4% coupon is pushing Mortgage Bond prices lower this morning.

The government reported that the Consumer Price Index (CPI) in January rose by 0.1%, which was below the 0.2% expected. The Core CPI rate was inline at 0.1%. Looking at the year-over-year numbers, the headline CPI rose to 1.6% from 1.5% with the Core fell to 1.6% from 1.7%, which are both below the Fed's upper end of 2% range. It is this very tame inflation number which puts the Fed in a quandary, they have tried to create inflation with each bout of QE and it simply hasnt happened. When you consider the bloated money supply, the Fed trying to create inflation is akin to stroking a match near a pile jet fueled soaked wood, if we see inflation, it can manifest quickly.

Weekly Initial Jobless Claims fell by 3K to 336K in the latest week, nearly inline with the 335K expected. Claims have been trending near this number for some time with no push below as the labor markets continue to work its way through some obstacles.

The Fed Minutes revealed one thing for surelack of consensus. Some members felt uncomfortable with the ongoing accommodative stance, suggesting higher rates, while others felt that rates should remain low. The Minutes also showed that in "the absence of an appreciable change in the economic outlook, there should be a clear presumption in favor of continuing to trim the Feds QE by $10 billion at each meeting. All this clarity the Fed is supposed to provide by giving forecasts and sharing Minutes may not be doing much to help economic conditions.

At 10:00am ET, the Philly Manufacturing Index will be released and comes after the weak reading from the manufacturing sector in the New York region on Tuesday.

Bonds are testing the recent lows seen last week. With yesterdays lock alert behind us, we can start new files carefully floating today. But be on guard, should prices dip from here, we will switch to locking.

Joe Shamie NMLS # 241432

First Choice Loan Services NMLS # 210764

First Choice Bank NMLS# 177877

866-970-3400 x-5135

jshamie@fcbmtg.com