Monday - September 29, 2014 - 9:50 am ET

Current Trend Direction: Higher

Float/Lock Bias: Carefully Floating

Current Price of FNMA 4.0% Bond:$105.50, +16p

Mortgage Bond prices continue to grind higher as Stock prices continue to drift lower.

Stocks, which lost a bit of ground last week, are slipping again as investors book profits with equity prices near all-time highs and the Fed on the QE3 exit ramp. Also helping the overall Bond Market is a fancy move in the 10-year Note with the yield dropping to 2.48% this AM and beneath the psychological 2.50% level. We are watching this move in the Bond Market carefullyas we said on Friday if Mortgage Bonds can break above this nearby ceiling with conviction (it has not happened yet) and the 10-year Note yield can form resistance at 2.50%...meaning that it moves lower each time it hits 2.50% (that has not happened yet either) - we may just see another leg lower in home loan rates.

Pro-democracy protesting in Hong Kong is reason for some of the safe haven move into Treasuries and the overall US Bond Market but lets be clear, QE3 is ending and Stocks dont like itremember that Stocks performed bad when QE1 and QE2 endedwe should expect the same with QE3. If you are invested in Stocks it is definitely reason to be cautious.

Economic news is plentiful this week beginning this morning with the better than expected Personal Spending rising by 0.5% in August, just above the 0.4% expected. Personal Incomes rose by 0.3%, which was inline with estimates. On the inflation front, August Core PCE came in at 0.1%, just above the 0.0% expected, while the year-over-year PCE was 1.5%, matching the July number. Not much inflation pressures at this time as the 1.5% is well below the Fed's target of 2%.

At 10am ET, August Pending Home Sales will be released with expectations of a small decline of -0.2%. The rest of the week's calendar is packed with a flurry of economic data culminating on Friday with the September Jobs Report. There are no Treasury Note or Bond auctions this week.

Technically, as mentioned, the 4% coupon is attempting to bust a move above a very important resistanceif Bonds are successful, you may see some renewed refinance activity as rates could definitely revisit the best levels in years. However any pullback from this level could be swift. Gameplan try and float this week until Thursday afternoon at that point we may be looking to lock in advance of the Jobs Report. A lot will depend on what happens between now and Thursdaybut at least we have a plan and something to talk about with clients and referral partners to start the week. J

Have a great week!

Joe Shamie NMLS # 241432

First Choice Loan Services NMLS # 210764

First Choice Bank NMLS# 177877

866-970-3400 x-5135

jshamie@fcbmtg.com