Friday - February 28, 2014, 10:25am ET

Current Trend Direction: Sideways to higher

Float/Lock Bias: Start day carefully floating

Current Price of FNMA 4.0% Bond: $104.69 -18bp

After closing higher for five straight days, Mortgage Bonds are slightly lower this morning as prices near a ceiling of resistance. We see this modest pullback as nothing more than simple profit taking after a nice run higher.

The 2nd reading for 2013 4th Quarter Gross Domestic Product (GDP) was just that GROSS. It fell to 2.4% from the initial reading of 3.2% and sharply beneath the 4.1% recorded in the 3rd quarter of 2013. The decline was due in part to consumer spending and exports that were less robust than initially thought, signaling U.S. economic growth remains choppy. In addition, there were negative contributions from federal government spending, residential fixed investment, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

But there was some good news in the reportCompany spending was revised up sharply to 10.6% from 6.9%, suggesting an improvement in business conditions. One component that didnt make sense given the weak GDP reading, but did spook the Bond markets a bit, was the hotter than expected PCE Deflator (inflation reading) rose to 1.3% from 1.1%.

With the recent rally in the Bond markets, traders may also be looking ahead to next Friday's February Jobs report, which is always a headline risk, where it is expected that employers added 149K new jobs in February.

Start the day floating and looking ahead, get clients positioned to lock in advance of next weeks Jobs Report. We will not be floating into that release on any shorter-term duration (days and weeks) transactions.

Joe Shamie NMLS # 241432

First Choice Loan Services NMLS # 210764

First Choice Bank NMLS# 177877

866-970-3400 x-5135

jshamie@fcbmtg.com