Rates are looking good for the near term!

This is from the MarketSnapshot, a service I subscribe to.

Early this morning the stock indexes were under another round of selling and the reaction in the bond and mortgage markets is what can be expected, the 10 yr note and the rest of the Treasury yield curve have lower rates and higher prices this morning. Two focal points that are drivers; the euro currency is weaker against the dollar and a key economic report out of China. As the euro falls the dollar gains and in turn US exports become more expensive slowing that sector. In Europe the debt problems persist increasing the view that Europe's economy will slow and may double dip as the EU countries initiate severe cost cutting and wage reductions to get their budgets in shape. A long haul that won't come without pain and contagion of economic weakness in the US.

At 9:30 the DJIA opened -90; the 10 yr up 12/32 at 3.24% -6 BP and mortgage prices +5/32 (.15 bp).

The euro fell 1.2% against the dollar over the weekend, extending its longest run of monthly declines in a decade to trade as low as $1.2111, its weakest since April 2006. This year the euro has lost 15% of its value against the dollar. Greece is the poster country for sovereign debt defaults in Europe; credit default swaps on Greece signal a 45% chance the country will fail to repay its debt within five years even after the European Union pledged almost $1 trillion to ease the region’s budget crisis. Riots in the streets; poor people rioting because they have to give up their two month a year vacations, here we hardly have time for two weeks.

China's purchasing mgrs manufacturing index fell to 53.9 on expectations it would be 54.5. The global economies are slowing; after all the optimism through the early part of this year that it onward and upward, the idea is losing ground rapidly. China has been making moves at the central bank level to slow its economy, fearing the growth was too heated that would lead to inflation increases.

US interest rates will continue to stay low as the global economic rebound looks like it has stalled. The Fed isn't going to make any moves to increase the FF rate in these conditions with inflation nowhere near the radar and the US economy beginning to struggle on global weakness. Unlikely the Fed will move rates higher until unemployment falls to 7.0%; comments out of the Fed suggest now that full employment will be seen at 7.0% unemployment; prior to the recession full employment was considered to be 5.0% to 4.5%; this is the "new normal".

This week's Economic Calendar is loaded with market-moving data:

          Tuesday;

               10:00 Apr construction spending (+0.1%)

                        May ISM manufacturing index (58.9 frm 60.4 in Apr)

         Wednesday;

               7:00 MBA weekly mortgage applications

               10:00 Apr pending home sales (+3.5%)

               2:00 May auto and truck sales (N/A)

         Thursday;

              8:15 ADP employment estimate for May (+56K)

              8:30 weekly jobless claims (-5K to 455K)

                     Q1 productivity second read (+3.4% frm +3.6% in the advance report last month)

                     Q1 unit labor costs (-1.6%)

              10:00 Apr factory orders (+1.7%)

                      ISM services sector index for May (55.5 frm 55.4)

        Friday;

             8:30 May employment report (NFP jobs +500K, most all census workers; unemployment rate 9.8% -1 0.1% frm Apr)

At 10:00 two economic reports; April construction spending was expected +0.1%, spending jumped 2.7%, the largest monthly gain since August 2000. The May ISM manufacturing index came at 59.7 from 60.4, better than forecasts; new orders component unchanged at 65.7, employment increased to 59.8 frm 58.5 and prices fell to 77.5 frm 78.0. Any index over 50 is expansion. The DJIA was down 50 points at 9:59, at 10:04 it was unchanged and was gaining.