Tuesday - September 16, 2014 - 10:15am ET

Current Trend Direction: Climbing higher

Float/Lock Bias: Carefully Floating

Current Price of FNMA 4.0% Bond:$104.97, +3bp

Mortgage Bond prices continue to drift a bit higher today being supported by falling Stock prices and ongoing tame inflation data.

Today, the Fed kicks off its 2-day Federal Open Market Committee meeting in Washington, D.C. to discuss the current state of the US economy and monetary policy. There will be no headlines out of the meeting today. But the important Monetary Policy Statement is set to be released tomorrow at 2:00pm ET.

The Labor Department reported that the August Producer Price Index (PPI) was unchanged while the Core PPI rose by 0.1% as falling gasoline and food costs kept a lid on prices. Both were in line with estimates. The year-over-year PPI rose 1.8%, down from a recent peak in May of 2%. Simply put there is no inflation.

With the economy still weak, I expect the key phrase that interest rates will remain as is for "considerable time after the asset purchase program ends" to remain in the Fed's statement following their two-day meeting this Wednesday. Altering this critical sentence will spook markets and boost rates by suggesting that the zero interest rate policy currently in effect will end sooner than expected. It goes out in December. We couldn't agree more, especially with a 2% growth economy, no wage growth or inflation to speak of.

Technically, the Bonds is edging higher off the bottom of the wide trading range. We are still floating with intentions of doing so into tomorrows Fed Statement as long as the market allows. 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