Thursday - August 14, 2014 - 12:45am ET

Current Trend Direction: Sideways just above resistance

Float/Lock Bias: Short term Locking

Current Price of FNMA 4.0% Bond: $105.66, +9bp

Mortgage Bonds are modestly higher being supported on news that the Eurozone economy ground to a halt in the second quarter as the debt problems continue to wreak economic havoc in the region.

It was reported that Germany's Gross Domestic Product contracted by 0.2% in the second quarter, due to weak foreign trade and investments, while France flatlined in its GDP for the second quarter. In addition, inflation in the Eurozone in July declined to its lowest level since the height of the global crisis five years ago. As we have been saying, the problems across the pond are far from over and a reason that short term interest rates here in the States will remain low for quite some time.

RealtyTrac reported that foreclosure activity across the nation rose for the first time in four months, up 2% from June to July as lenders scheduled more properties for auction. However, activity is still down 16% from last year and July marked the 46th straight month in which activity declined on an annual basis.

In economic news, Weekly Initial Jobless Claims rose by 21K in the latest week, the highest level since June to 311K versus the 305K expected. The news didn't have much of an impact on trading.

At 1:00pm ET the results from the $16B 30-Year Bond auction will be released.

Technically, the 4% coupon closed just near resistance at the 25 and 50-day Moving Averages yesterday and is trading above those levels today. However, until we can see consecutive days of a close above resistance, we will continue to recommend short term locking, days to a week out.

Joe Shamie NMLS # 241432

First Choice Loan Services NMLS # 210764

First Choice Bank NMLS# 177877

866-970-3400 x-5135

jshamie@fcbmtg.com