Tuesday - July 22, 2014, 10:25am ET

Current Trend Direction: Sideways, stalling at resistance

Float/Lock Bias: Carefully Floating

Current Price of FNMA 4.0% Bond: $105.59, -6bp

Bonds are just slightly higher after dealing with a tame consumer inflation reading and some fading of the geo-political, flight-to-safety trade.

The Labor Department reported that the June Consumer Price Index (CPI) rose by 0.3%, which was inline with expectations and lower than the 0.4% recorded in May. The gain was led by a rise in gasoline prices in June, but offset by a deceleration in food prices. The Core CPI, which strips out volatile food and energy, edged up 0.1%, below the 0.2% expected. On a year-over-year basis, the headline CPI was up 2.1%, matching the May number, but up from 1.1% in February. The Core was up 1.9%, down from the 2% in May and up from 1.6% in February. Inflation has been on the rise and will be closely watched by the Fed.

Later this morning, June Existing Home Sales will be released.

In housing news, the Federal Housing Finance Agency (FHFA) reported that its Home Price Index rose by 0.4% in May, while the year-over-year number was up 5.5%. The FHFA House Price Index (HPI) is calculated using home sales price information from mortgages either sold to or guaranteed by Fannie Mae and Freddie Mac. The price appreciation numbers have been falling in recent months and are coming back to more normal levels.

Technically, the 4% coupon continues to hover just above resistance at the 25 and 50-day Moving Averages, but seem to be stalling. If it can close above resistance today, it could be a positive sign, but with Stocks on the move higher, it may be tough to achieve that goal as the trading day unwinds.

We are still floating, if anything changes, we will quickly alert you.

Joe Shamie NMLS # 241432

First Choice Loan Services NMLS # 210764

First Choice Bank NMLS# 177877

866-970-3400 x-5135

jshamie@fcbmtg.com