Tuesday - March 25, 2014, 10:40am ET

Current Trend Direction: Sideways

Float/Lock Bias: Start day carefully floating

Current Price of FNMA 4.0% Bond: $103.84, unchanged

Mortgage Bonds are in an interesting trading pattern. Each of the last three days, prices opened lower and closed higher from where they opened hence the GREEN candles on the price chart. Prices opened lower again today but are now unchangedwill this be four days in a row? We will see. It is worth noting that the Bond is convincingly below a layer of resistance at a series of Moving Averages, including the 200-day MA.

In housing news, the Case Shiller 20-city Price Index rose 13.2% from January 2013 to January 2104, down from the 13.4% in December and lower than the 13.3% expected. From December to January, prices rose by 0.8% on a seasonally adjusted basis. Non-seasonally adjusted, prices fell by 0.1% from December, with 12 of 20 cities posting declines and was the third monthly decline. A spokesman for Case Shiller said that he sees the consensus is for moderating gains. We agree that the gains in 2014 will be much lower than those in 2013. What is Seasonally adjusted? -A statistical technique designed to even out periodic swings in statistics or movements in supply and demand related to changing seasons. Seasonal adjustments provide a clearer view of non-seasonal changes in data that would otherwise be overshadowed by the seasonal differences.

Equifax reported that first mortgages increased 2.8% from the same period a year ago, which was the largest year-over-year increase since September of 2008. The total balance of first mortgages is at $7.97T, the highest since December of 2011.

Philadelphia Fed Bank President and voting member Charles Plosser said this morning on CNBC that he was surprised at the sell-off in the Stock markets after Fed Chair Janet Yellen said last week that short term rates, Fed Funds Rate, will probably begin the rise about 6 months after the Fed winds down QE III late this year. Plosser said that has been the timeline that the Fed has been conveying in the past few FOMC meetings. Stocks have since regained those losses. When we see the Fed exiting the easy money policy, we cant help but think of the old mantra, Dont fight the Fedmeaning that if QE3 is going away and rates up with it, Stocks will likely not perform well.

The most interesting thing to come out of last week's Fed statement wasn't that the Fed Funds rate will start rising in 2015 or that the unemployment rate isn't the single most important number, but that the Fed expects the rate at which interest rates rise will be much slower than in previous recoveries. To wit, they currently expect Fed Funds to rise by just 2% between now and 1/16.

Technically, the Bond is pressing up against the first layer of resistance at $103.81, which was the low seen on January 23. The next layer is the 200-day Moving, which has been both support and resistance since the beginning of the year.

We are floating, but real carefully. Stock prices are pushing higher this morning and that may weigh on Bonds and break the aforementioned string of Bond price improvements throughout each of the past few days.

Joe Shamie NMLS # 241432

First Choice Loan Services NMLS # 210764

First Choice Bank NMLS# 177877

866-970-3400 x-5135

jshamie@fcbmtg.com