It is show time.

The Treasury Department's record setting $104 billion three-part auction officially kicks off with today's $40 billion 2-year note offering (concludes at 1:00 p.m. ET).  Most observers believe credit market participants will have little trouble absorbing this record amount of supply - but they are not so sure investors will greet tomorrow's $37 billion of 5-year notes and Thursday's $27 billion of 7-year notes quite as enthusiastically. 

Right in the middle of Uncle Sam's massive record setting $104 billion dollar three-day borrowing spree Fed Chairman Bernanke and his band of merry central bankers are huddling to discuss monetary policy and what if any adjustments should be made to their current quantitative easing strategies.  The Fed's two-day meeting will conclude tomorrow afternoon with the release of their post-meeting statement at 2:15 p.m. ET. 

The likelihood that policymakers will choose to leave their benchmark fed funds rate at zero is a virtual "no-brainer." Such an outcome is already priced into the mortgage market.  Investors, however, will be firmly focused on the Fed's post-meeting statement for any hint the central bank intends to ramp-up their current authorization for the direct purchase of $1.25 trillion of agency mortgage-backed securities, $300 billion of Treasury debt obligations and $200 billion of the corporate debt obligations of Fannie Mae and Freddie Mac. 

So far, the Fed has burned through roughly 50% of their current interest rate supporting direct-purchase "war chest."  The majority of market analysts tend to believe the Fed will choose to make no change to the size of their direct-purchase checkbook this time around - preferring to take a "wait-and-see" approach -- before printing up another gargantuan batch of dollars to temporarily send interest rates in general, and mortgage interest rates in particular, a few basis points lower.  

If this assessment proves accurate -- look for mortgage interest rates to drift fractionally higher for the balance of the week.   In the unlikely case the Fed surprises the market place with the announcement of a notable expansion of their quantitative easing programs -- expect mortgage interest rates to slide incrementally lower from current levels.

On a different subject - the National Association of Realtors reported this morning that May Existing Home Sales climbed 2.4%.  The May sales gain was slightly lower than most economists had anticipated - but their disappointment was largely muted by the realization that existing home sales have now posted two consecutive monthly gains - something that has not happened since 2005.  This report had no impact on the trend trajectory of mortgage interest rates today.

Today's conforming 30 year fixed rate is at 5.50%.