Wednesday - July 9, 2014, 12:15pm ET

Current Trend Direction: Stabilizing, testing resistance

Float/Lock Bias: Cautiously Floating

Current Price of FNMA 3.5% Bond: $102.19, -12bp

After a 2-day rally, Mortgage Bonds are little lower as Stock prices rebound on a positive kickoff to corporate earnings season. Alcoa, who always starts earnings season, posted an adjusted quarterly profit of 18 cents per share, 50% more than expected. The news has set a bullish tone for equity prices so far this morning.

There are no economic reports due for release today, but at 2:00pm ET the June FOMC minutes will be released. The Minutes could reveal more details on the winding down of QE III and a more approximate time as to when the short term interest rate, the Fed Funds Rate, may start to rise.

The Treasury will sell $21B 10-Year Notes today with the results being released at 1:00pm ET. This auction comes after yesterday's decent 3-year Note offering.

The U.S. Energy Information Administration (EIA) reports that in 2015, domestic crude oil production is likely to be the highest since 1972. The boom has dramatically lowered petroleum imports. The US and Canada are expected to account for most of the worlds projected growth in production of oil and other liquid fuel through 2015 while China and less developed countries will drive most of the growth in consumption, according to the EIAs July forecast. Texas and North Dakota now account for half of the total US oil production.

Technically, the 3.5% coupon has struggled to trade above resistance supplied by the 25 and 50-day Moving Averages since dropping below those levels last week. We will carefully float into the Fed minutes with today's losses being on the modest side. As always, stay tuned and be sure to look to the Market News section around 2pm for the headlines and the impact from the Fed minutes.

Joe Shamie NMLS # 241432

First Choice Loan Services NMLS # 210764

First Choice Bank NMLS# 177877

866-970-3400 x-5135

jshamie@fcbmtg.com