Tuesday - May 20, 2014, 2:00pm ET

Current Trend Direction: Sideways to lower

Float/Lock Bias: Floating

Current Price of FNMA 4.0% Bond: $105.50, +31bp

A lack of economic data, few notable headlines and holiday shortened trading week makes for a quiet trading day so far today. Bonds are virtually unchanged.

Stock prices rebounded yesterday after the closely watched S&P 500 fell two straight weeks. With earnings season nearly completed, of the companies in the S&P, about 75% of those that have posted results this season have beaten analysts estimates for profit, while 53% have exceeded sales projections. The S&P is now up a whopping 183% from the low of 666 hit on March 9, 2009. There is concern amongst Fed Members that the risk of rising asset prices, like Stocks, outweigh the risk of runaway inflation. We cant argue with that assessment as the Stock market continues to push higher and the Fed has sheltered investors from a real Stock selloff. As we noted not too long ago, the market reaction could be much worse than would have been previously had the Fed not keep rates so low for so long. Obviously if Stocks struggle Bonds should benefit.

Technically, the 4% coupon is resting on weak support levels and could easily fall through those levels in the blink of an eye. Start the day floating but carefully so.

Joe Shamie NMLS # 241432

First Choice Loan Services NMLS # 210764

First Choice Bank NMLS# 177877

866-970-3400 x-5135

jshamie@fcbmtg.com