Traders, both in stocks and bonds are on edge this morning as the FOMC decision looms.  Earlier today, Durable Goods Orders surprise to the upside, posting a plus 1.8% while the ex-transportation index rose 1.1%.  Economist were expecting a drop of .6%.  Although this is a volatile piece of data, the strong showing will translate into positive developments for manufacturing and industrial production.  New Home Sales however fell to a seasonally adjusted annual rate of 342K units.  Economists were looking for a rise to 360K.  In the South, sales fell 8.5% while every other region experienced gains.  The Northeast led the way with gains of 28.6%.  We will be looking for good things out of Jay’s group given this print.  Inventories of new homes still stands at 10.2 months, down slightly from April’s 10.4 mark.  Although important, today’s data will take a back burner to the FOMC release due at 1:15 pm cst.  We favor the market consensus which calls for no change in rates or policy statement.  Our feelings are that the economy is too fragile to rock the boat.  Keep in mind that the Fed’s mission is to steady the economy and fight inflation.  In times like this, fighting deflation is more in vogue.  The only change we could/should see would be a tweaking of their Quantitative Easing initiative by moving some of the money to buy MBS to additional purchases of treasuries.  In our opinion this is baloney.  Why take money away from the intended idea of keeping mortgage rates low to spur the housing industry.   Furthermore, we’ve seen how well the purchase of treasuries has worked lately.  In the event this happens, expect a fast market in MBS with sellers leaning on the market.  Extending the buyback program through the end of the year would make the most sense.  Let’s hope they get it.  Whichever way this goes, a swift pickup in volatility should occur.  Currently, the 10 year note is unchanged to yield 3.64%, mortgage backs are off 5/32’s, and stocks are up 50 or so on the big board.  More when the rubber meets the road.