Wednesday - July 23, 2014, 10:15am ET

Current Trend Direction: Sideways to higher

Float/Lock Bias: Carefully Floating

Current Price of FNMA 4.0% Bond: $105.81, +9bp

Mortgage Bonds are inching higher in response to mixed earnings from Apple and Microsoft, increased tensions in the Mideast and reports that two Ukrainian fighter jets were shot down early today.

There are no economic reports scheduled for release.

In mortgage news, the Mortgage Bankers Association reported that its Market Composite Index, a measure of total loan application volume, rose by 2.6% in the latest week after declining in the previous week. The refinance index rose by 4% while the purchase index barely budged, up 0.3%. Home loan rates continue to hover near 12-month lows and just above historic lows - get your client to get off the fence at the low levels.

Black Knight Financial Services reported that the national foreclosure inventory of loans declined again in June, down 1.5% for the month and lower by nearly 36% from June 2013. Foreclosure inventories are now at the lowest levels since May of 2008. However, foreclosure starts rose for the 2nd straight month in a row, though down 19% from a year ago. Housing has not fully recovered. Fed Chair Janet Yellen said last week on Capitol Hill, "I have to say that Im somewhat surprised. Frankly, it (housing) continues to be sluggish. And I cant give you a precise reason why thats occurred. One reason, whether the Fed wants to admit it or not, is that we have not seen true, meaningful growth in the economy for many years. Until the economy can stand up on its own feet without having to be underwritten by the Fed, we should expect the recovery in housing to be more of the sameuneven.

Technically, the 4% coupon closed and opened above resistance at both the 25 and 50-day Moving Averages, which now become support. This is a good sign. With Stock prices trading back at resistance at the all-time highs, investors may look to take some profits, which could support Bond prices further.

We are still floating, but be in guard for any reversal lower as Mortgage Bond prices climb back to highs not seen since May of 2013.

Joe Shamie NMLS # 241432

First Choice Loan Services NMLS # 210764

First Choice Bank NMLS# 177877

866-970-3400 x-5135

jshamie@fcbmtg.com