Mortgage backed sceurities (MBS) prices continue to fall (rates climb) in volatile trading ahead of the Treasury auctions today and tomorrow; FNMA 4.0% coupon 98.82bps, -26bps. Mortgage Bankers Association (MBA) weekly survey shows demand for purchases is weak even with rock bottom interest rates and an enormous supply of homes for sale. The purchase index did edge higher, 2.6%, but still remains anemic. The refinancing gauge remains strong but did fall back 19% as rates rose 12bps last week. Chain store sales showed some weakness, given the warm weather and the long weekend, raising serious questions over the economic outlook if there is a third month of decline for retail sales. Existing Home sales gained 2.9% in April as foreclosure auctions and improved affordability spurred bargain hunters. The median sales price slumped 15% from a year earlier and distresses properties accounted for 45% of sales.