Treasuries and mortgages opened stronger today on weak global stock markets and trading in the US stock futures pointing to another weaker open. At 9:00 the 10 yr +11/32 3.65% and mortgages +9/32 frm yesterday's close. The DJIA futures at 9:00 -49 points. At 9:30 the DJIA opened -32, the 10- yr +15/32 and mortgage prices +9/32. (see below for 10:10 levels)

While we and the markets were completely focusing on Treasury supply this week, so far it has been the slight softness in the equity markets that have to some extent trumped presumed supply pressure. Yesterday's $42B 2 yr note auction was not a barn burner, just OK at best with the rate coming in 2 BPs higher than trade in the WI market prior to the auction; the cover and indirect bidding were good but after the strong bidding a nth ago, not up to those levels. This afternoon we move up the curve with $39B of 5 yr notes being offered at 1:00.

At 7:00 this morning the weekly MBA mortgage applications fell 6.3% last week; purchase applications were unchanged while re-finance applications fell 11.0%. The decline in the overall applications is the first in four weeks. Mortgage rates last week were very volatile, declining early last week, increasing last Thursday and Friday but at the end of the week not much change; the volatility may have contributed to the decline in re-fis. Housing remains the key to recovery in the economy; recent data on any housing reports has been taken as a bottoming in pattern from the 2 yr declines in prices, sales and building. We are not yet willing to climb on that bandwagon yet, the forecasts and estimates are being exceeded in the reports but forecasts have been excessively bearish so any improvement is a relative thing.

June durable goods at 8:30 were down 2.5% against forecasts of -0.5%; however take transportation orders out and durables were up 1.1%. May durables were revised to +1.3% frm +1.8%. Durables defined as anything lasting more than 3 yrs; it is a very volatile series and didn't support the equity markets or pressure the rate markets.