This week's Treasury borrowing needs is hitting the bond and mortgage markets as the week starts. At 8:30 the 10 yr note -10/32, mtgs -5/32. At 9:00 the 10 yr -23/32 3.76% +10 BP; mortgage prices -12/32. Early trade in the equity market futures were fractionally lower at 9:00. At 9:30 the DJIA opened -22; 10 yr -18/32 3.74% and mortgages at 9:30 -10/32. (see below for 10:00 levels)

June new home sales at 10:00 were expected to be +2.3%; jumped a whopping 11.0% to 384K. The supply based on present sales has fallen to 8.8 months from 10.2 in May. The jump is sales is the largest month to month increase since Dec 2000. The median sales price $206,200.00. The initial reaction was rather muted in both the stock and bond markets.

At 1:00 this afternoon Treasury will start the supply train with $6B of 20 yr inflation indexed bonds. Kind of a orphan auction but still will get attention. Should go well, while inflation isn't an issue now most believe it will be in the next year or so.