Quiet but weak start today in the bond and mortgage markets. Europe's stock markets better except for the UK, its index down slightly. This week is likely to be thin trading with the holidays and an early close in the bond market on Friday. Although there are a number of key economic reports (mostly Nov housing), Treasury will auction $99B of notes, and Europe has a deadline (self-imposed) today for drawing additional aid to the debt crisis and to form new budget rules; trade should be quietly unchanged by the end of the week. That said, if there is any significant changes in the bond and stock markets it will be triggered by events in Europe. Euro-area officials aim to meet their deadline for today to arrange the IMF loans. The package entails about 150 billion euros pledged by euro-area central banks and another 50 billion euros to be contributed by non-euro EU states.

At 9:30 the DJIA opened +27, the 10 yr note traded -3/32 and mortgage prices were down 3/32 (.09 bp).

The only scheduled data today, Dec NAHB housing mkt index, expected at 20, increased to 21 frm 19 in Nov. Single family index at 22 frm 20; next six months index increased to 26 frm 25. (50 is the pivot for the indexes, above expansion, below contraction).

At 1:00 Treasury will auction $35B of 2 yr notes, likely it will be strongly bid as have been most Treasury auctions recently. The death of Kim Jung II in N. Korea should add more to the demand for US debt.

This Week's Economic Calendar:
Monday;
10:00 am Dec NAHB housing market index (as reported
1:00 pm $35B 2 yr note auction
Tuesday;
8:30 am Nov housing starts and permits (starts -0.8%, permits -2.8%)
1:00 pm $35B 5 yr note auction
Wednesday;
7:00 am MBA mortgage applications
10:00 am Nov existing home sales (+2.2%)
1:00 pm $29B 7 yr note auction
Thursday;
8:30 weekly jobless claims (+14K to 380K)
Q3 final GDP (+2.0%, unch frm prelim report last month)
9:55 am U. of Michigan consumer sentiment index (68.0 frm 67.7)
10:00 am Nov leading economic indicators (+0.3%)
FHFA Oct price index ( +0.3%)
Friday;
8:30 am Nov durable goods orders (+2.0%; ex transportation orders +0.3%)
Nov personal income and spending (income +0.2%, spending +0.3%)
10:00 am Nov new home sales (+1.9%)

Last week the 10 yr note yield declined 25 basis points, mortgage rates down 10 bp. Technically the bond market has improved while the MBS market, still holding nicely is being propped up by treasuries. Europe still the key driver for the lower US rates on movements into the US dollar through safety into treasuries. The low yield on the 10 occurred in Sept at 1.70% when Europe's debt problems infected Italy and Spain. Whether yields will get back to the historic lows depends on what happens in Europe; that is hard to handicap, there has been nothing but talk and plans but so far no progress to head of defaults or anything that takes the region back frm the cliff edge.