The bond and mortgage markets started weaker this morning with the stock market trade pointing to a strong open at 9:30. At 8:30 the 10 yr note was -9/32 at 3.51%, mortgage prices were down 6/32, the DJIA index futures was +83. At 9:00; the 10 yr -9/32, mtgs -6/32 and the DJIA +88. At 9:30 the DJIA opened +100, the 10 yr note -17/32 at 3.54% and mortgage prices -8/32.

Early this morning (7:00) the weekly MBA mortgage applications were +4.3% but it was all re-financing; the purchase index fell 9.4% while re-fi apps jumped 17.7%. The refinance share of mortgage activity increased to 54.9% of total applications from 48.4% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.0% from 4.4% of total applications from the previous week. The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.05 percent from 5.34 percent, with points decreasing to 1.12 from 1.13 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.59 percent from 4.83 percent, with points increasing to 1.07 from 1.06 (including the origination fee) for 80 percent LTV loans.

At 8:30 June CPI hit right on forecasts; overall +0.7%, the core rate excluding food and energy components +0.2%. Inflation just is not an issue right now so inflation data doesn't carry as much concern as it normally does in a functioning economy.

Also at 8:30, and a bigger driver than the CPI, the NY Empire State manufacturing data. The overall index was up to -0.55 frm -9.4; new orders index +5.89 frm -8.15, employment index at -20.83 frm -21.84, and prices pd index at +10.42 frm -5.75. The increase in new orders and a slightly better employment, as well as the overall jumping is adding to belief the manufacturing sector is coming alive. (Any index read over zero is expansion, under zero contraction.

The came 9:15 with June industrial production and factory usage. June industrial production was slightly better than -0.6% expected, at -0.4%. Capacity utilization set another record low at 68% but again slightly better than 67.9% expected. There was no direct market reaction to the two releases.

Later this afternoon (2:00) the minutes from the June 24th FOMC meeting. Markets will look for any discussion on the Fed's exit plans from the monetary stimulus packages. Normally not much in the way of surprising information comes from the minutes, but there are those that revel in pouring into the dialogue for those ever elusive clues