Despite numerous pieces of data, trading is still calm before the FOMC announcement at 2:15PM Eastern.
So with MBS holding steady overnight, and wild fluctuations in rates likely holding off until after 2:15pm, I'll issue your second boarding call for the "float boat."  As I said in last night's post, the voyage ahead is fraught with uncertainty.  By floating, we will be sailing into the very eye of the storm.  Sure, staying on land today (locking) is the safest bet, but for the brave sailors who venture out into the waters of chance, the potential rewards are great.  The caveat is that our navigation must be peerless and our reactions instantaneous.  We may be suddenly jumping ship and swimming back to shore or even allowing the storm to bruise us knowing that calmer waters will prevail.

OK, that's nearly the end of extended metaphors for the morning, but hopefully you get the idea.  Locking now takes the risk out of the market, but floating can certainly pay off.  If you float, you must be ready to act at a moment's notice, or otherwise be able to continue floating for 1-3 weeks.  You must also stay tightly glued to this blog by hitting the refresh button minute by minute after the announcement so that you can be aware of impending changes.  Keep in mind that even if we lose a little ground (4-6/32nds) immediately following the decision, this will likely not impact most lenders rates as they will have already priced that potential volatility into the rate sheets today.  So sailor, are you up to it?  This ship leaves port at 2:15.  You can get off now, or trust your ability to swim back to shore later should catastrophe strike.

You're staying?  Ok then, here's the "weather report" for today.  Consider these news items as the backdrop for the announcement later today.

  1. GDP -  Growth occurred at 6%, which is not quite high enough over the consensus of .3% to cause much of a stir.  In addition, many of the GDP components are not quite as upbeat.  PCE (personal consumption expenditures) rose by 1.0% which is the lowest in 13 years.  Durable goods spending was down for the first time in over 2 years, non durables were down also with the lowest reading since 1991!  That was recession-time!  In fact, only services spending kept the GDP in positive territory this time around.  Residential Investment saw its worst decline in over 25 years! 
  2. ADP Employment Report - Some think this is a good forecast of Jobs numbers on Friday and most do not.  It is calling for a 10k job increase in April.  Thomson-Reuters cites that in the last five months, ADP's number has overestimated the actual jobs numbers released by BLS (Bureau of Labor Statistics) by 96,000!  Quite a margin!
  3. Employment Costs rose .7%, a tick lower than the consensus of .8%.  This is good news for inflation, thus good news for MBS.
  4. Chicago's NAPM index beat expectations of 47.5 coming in at 48.3, but was just .1 higher than March.  A reading under 50 signifies contraction.  Canceling out any positivity of the overall number was the employment index component therein.  It read at 35.3.  This is an outright recessionary.
  5. MBA purchase index fell to 340.1, it's lowest level this year.
That's it for now.  If any major changes occur between now and FOMC announcement, I will keep you posted.  There is cause for concern now that with some of the data this morning potentially easing concerns of inflation that the Fed will actually hint at potential future rate cuts, which could spook the bond market about future inflation.