Markets started out today generally unchanged as the world awaits the FOMC policy decision and Bernanke's press conference this afternoon. It isn't news that for the last six weeks, since the strong April employment report released on May 3rd that markets have been debating what the Fed may or may not do about cutting back in its QEs. That is about all we have had to think about for over a month now. Today markets' hope there will be clarity, possibly wishful thinking but hope always springs eternal.

QUESTIONS: How will the FOMC policy statement frame the economic conditions and the outlook? Will Bernanke define his view on the economy and interest rate levels? Will he respond to Pres. Obama's rather surprising comments that Bernanke has spent more time than he wanted at the Fed, suggesting he will not return for another term? What will he have to say about the spike in the 10 yr note yields and mortgage rates over the last six weeks? A lot of questions that have kept markets in volatile movements for too long. Mortgage rates increasing on the drive higher in the rate for the 10 yr treasury note; the housing sector so far not showing much decline but higher mortgage rates frm current levels will have a negative impact on the strongest segment of the economy. The FOMC and Bernanke have a lot to accomplish to clear the air, my thought is that at the end of the day there will be some clarity but won't be enough to settle markets for very long.

The only data this morning was the weekly MBA mortgage applications for last week. Mortgage applications decreased 3.3% from one week earlier, for the week ending June 14, 2013. The Refinance Index decreased 3% from the previous week. The seasonally adjusted Purchase Index decreased 3% from one week earlier. The unadjusted Purchase Index decreased 4% compared with the previous week and was 12% higher than the same week one year ago. The refinance share of mortgage activity was unchanged at 69% of total applications from the previous week. The adjustable-rate mortgage (ARM) share of activity was unchanged at 7% of total applications. The government share of purchase applications has been at 29% for the past two weeks, which is the lowest level in the history of this series. The HARP share of refinance applications increased to 31% from 29% the week prior. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 4.17%, the highest rate since March 2012, from 4.15%, with points decreasing to 0.41 from 0.48 (including the origination fee) for 80% loans. This is the sixth straight weekly increase for this rate. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.23% from 4.25%, with points increasing to 0.34 from 0.32 (including the origination fee) for 80% loans.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.85%, the highest rate since April 2012, from 3.81%, with points decreasing to 0.22 from 0.26 (including the origination fee) for 80% loans.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.30% from 3.32%, with points increasing to 0.39 from 0.38 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs increased to 2.81%, the highest rate since June 2012, from 2.78%, with points increasing to 0.35 from 0.30 (including the origination fee) for 80% loans.

At 9:30 the DJIA opened -15, NASDAQ -2, S&P -2. 10 yr at 2.18% unchanged; 30 yr conventionals +8 bp and FHA's -17 bps.

Prior to this afternoon's events the bond and mortgage markets are still technically bearish. To change that the 10 yr note needs to close at or below 2.10% (now 2.17%) and 30 yr 3.5 July FNMA coupon price needs a close above 103.64 (now at 103.37). Both those levels would break their respective 20 day averages, not since May 3rd have either traded below the 10 yr yield 20 day and above the MBS 20 day average price. Over and above all the debate over the economic outlook and what the Fed may do or not that has dominated everything for six weeks, we have to focus on how the markets are trading technically. It isn't talk that carries weight but what investors and traders are actually doing with their trades that set the tone.