Morning Report: What to watch for in economics this week

Vital Statistics:

	Last	Change	Percent
S&P Futures	1568.5	-15.6	-0.98%
Eurostoxx Index	2502.6	-46.9	-1.84%
Oil (WTI)	93.38	-0.3	-0.33%
LIBOR	0.277	0.004	1.47%
US Dollar Index (DXY)	82.8	0.483	0.59%
10 Year Govt Bond Yield	2.64%	0.11%
Current Coupon Ginnie Mae TBA	99.5	-1.6
Current Coupon Fannie Mae TBA	99.38	-1.1
RPX Composite Real Estate Index	205	0.2
BankRate 30 Year Fixed Rate Mortgage	4.36

A sea of red to greet investors this morning. The SPUs are down 15, and the the 10 year is down close to a point. MBS are down as well, with the FNCL 3.5s below par. We should be best-exing into a 4% security at this point, and are well on our way to hitting 4.5s.

The back up in yields is not only a US phenomenon. The UK gilt and the Canadian 10 year have been moving almost in lockstep with the US 10 year. Japanese and German yields are up small, but not as much as us. For those keeping score at home, the 10 year yield increased 40 basis points last week. 

Economically, we have a lot of stuff coming up this week, although not much is market moving. The big question is whether the back up in interest rates is affecting the economy.Watch the consumer confidence numbers (Conference Board on Wed, Michigan on Friday) to see if the jump in interest rates is affecting people's perception of their own financial situation. Pending Home Sales on Thursday is another one - that should affect contract signings over the past month and will give a clue as to whether the hike in rates is affecting the purchase market. On Thursday, we also get personal income and personal spending. 

Bond mutual funds and ETFs had record withdrawals in June, according to Trim Tabs. So far, over $47 billion has exited bond funds. This withdrawal exceeds the record set in October 2008 at the height of the financial crisis. Where that money goes is the $100,000 question. 

The Chicago Fed National Activity Index improved somewhat in May, although it is still negative and the the 3 month moving average is getting dangerously close to recession territory.