Mortgage Bonds are trading lower as prices drift down near the 2013 lows. Prices have fallen nearly 300bp since the Fed statement was released on May 1. Talk about sell in May and go away!!!!

The cause for the slide lower is continuing debate that the Fed's Bond purchase program could end sooner rather than later. Several Fed members who are known to be dovish when it comes to monetary policy, have come out and said that the central bank could taper purchases at some point over the next few months if the economy continues to grow. The Fed is buying a total of $85B in Mortgage and Treasury securities each month to stimulate the economy. With the government deficit spending being modestly less, the Fed could pare back some of its buying and they would still be purchasing the same percentage or more of the supply coming to the Bond Market.

We don't see a meaningful pullback on the buying just yet. The Labor Force Participation Rate is dismally low and recent incoming economic data has been somewhat weak.

Government Sponsored Enterprise Fannie Mae published its monthly market update yesterday reporting that the U.S. economy should see a modest re-acceleration in growth in the second half of 2013, with housing one of the main catalysts. Fannie Mae went on to say that economic activity eased in the past few months due to fiscal drags and the sequester.

There are no economic reports due for release today and there are no Bond or Note offerings by the Treasury this week.