Starting off this morning at 7:00 AM the weekly MBA mortgage applications report; overall apps increased 7.5% last week, re-financings led the way, up 12.7% with purchase apps up 1.0%. Re-financings accounted for 56.5% of all apps last week according to the MBA. The four week moving average for the seasonally adjusted Market Index is up 3.5 percent. The four week moving average is up 1.7% for the seasonally adjusted purchase Index, while this average is up 4.8% for the refinance Index. The average contract interest rate for 30-year fixed-rate mortgages increased to 5.24% from 5.15%, with points increasing to 1.07 from 0.98 (including the origination fee) for 80% loan-to-value (LTV) ratio loans. The average contract interest rate for 15-year fixed-rate mortgages increased to 4.58% from 4.52%, with points increasing to 1.18 from 0.93 (including the origination fee) for 80% LTV loans.

At 8:30 July durable goods orders were better than expected; +4.9% against +3.0% expected for the overall increase; however, when transportation orders are extracted orders were slightly less than expected at +0.8% against 1.0% expected (removing trains, planes and automobiles) is the more significant aspect of the report. The jump in orders is the largest month-to-month increase since July 2007. Inventories fell 0.8%. Looks good on the surface but it is a volatile series subject to huge revisions. The more significant question hanging over orders is whether those orders will trickle down to finished goods being purchased. There was no market reaction to the report in either the rate markets or trading in stock indexes.

At 8:30 the 10 yr note and mortgages were unchanged; at 9:00 the 10 yr +1/32 and mortgages +2/32, the DJIA was down 12 points. At 9:30 the DJIA opened -30, the 10 yr +2/32 and mortgage prices at 9:30 +1/32 frm yesterday's close. (see below for 10:10 price levels)

Next up were July new home sales; expected to increase 1.5%, as reported sales jumped 9.6% to 433K against 390K expected. June sales were revised higher also, frm 384K units to 395K units (annualized). The increase is the largest month/month since Feb 2005. There is a 7.5 month supply against an 8.5 month supply in June. The median sales price $210,100.00. The reaction is what we would expect; the DJIA was off 50 points it flipped to +10 points; the 10 yr note and mortgages gave up their earlier gains back to unchanged.

At 1:00 this afternoon Treasury will offer up $39B of 5 yr notes on the second of the three legged auction week. Yesterday's 2 yr went OK in terms of bidding and demand but the rate it went for was higher than where it traded in the morning yesterday in the when-issued market.

Can China pull the global economies out of the recession? Not on its own, it will take the US consumer to return to spending and that isn't likely looking out the next year. US consumers account for 17% of all global spending. Not only US consumers, consumers around the world are not likely to return to spending sprees that drove global economies to record levels before the US sold junk sub prime mortgages to the world; crashed the world's financial systems, and revealed the greed that dominated financial markets.