Prior to 8:30 this morning the rate markets were a little weaker in price; the 10 yr note -6/32 at 1.68% and mortgage prices -3/32 (.09 bp). At 8:30 May retail sales were reported -0.2% about in line with forecasts, the core (ex auto sales) -0.4% weaker than thought. April retail sales was revised from +0.1% to -0.2%, April ex autos revised from +0.1% to -0.3%. The revisions to April caused stock indexes to decline with the DJIA futures -53 at 9:00. Also at 8:30 May producer price index, expected -0.4%, fell 1.0%; ex food and energy +0.2%; yr/yr PPI +0.7% but yr/yr core +2.7%. The April revisions supported the bond and mortgage markets; at 9:00 the 10 yr +6/32 at 1.64% and MBS 30 yr price +3/32 (.09 bp). European leaders may consider relaxing Greece's austerity program after election, the Financial Times edition reported without citing anyone. Syriza's leader, the Greek party that wants to keep Greece in the EU, wrote in the Financial Times that his party is committed to keeping the country in the euro area and will seek to amend a bailout agreement the nation signed in March with the European Union and the International Monetary Fund. In the final polls before this week's vote showed the New Democracy party retaining its lead over Syriza, with the support of 26.1% of 1,012 Greeks surveyed. Syriza had 23.6%. That poll showed that Syriza gained 3.5 points in a week, compared with less than a percentage point for New Democracy. Sunday Greeks will vote once more after there was no consensus two months ago at the last election. Escalating borrowing costs and shrinking output are opening divisions among EU leaders who face a series of hurdles in the coming days as bond investors question their ability to hold the euro area together. Spain and Italy appealed to European policy makers to step up their response to the financial crisis after a 100 billion-euro ($125 billion) lifeline for Spanish banks failed to calm markets. Spanish Prime Minister Mariano Rajoy said today he'll "battle" central bankers refusing to buy debt from peripheral nations. Rajoy published a letter to European Union leaders calling for the European Central Bank to buy debt from the countries struggling to shore up their finances. Still about as much uncertainty today as has been the case for over two years; as long as it continues money of al denominations will continue to seek safety rather than assume risk. Mortgage applications increased 18.0% from one week earlier, according to data from the Mortgage Bankers Association's (MBA) the week ending June 8, 2012. The week's results included an adjustment for the Memorial Day holiday. The Refinance Index increased over 19% from the previous week to the highest index level since April 2009. The seasonally adjusted Purchase Index increased around 13% from one week earlier. The refinance share of mortgage activity increased to 79% of total applications from 78% the previous week. The adjustable-rate mortgage (ARM) share of activity remains around 5 percent of total applications from the previous week. The average loan size of all loans for home purchase in the US was $243,733 in May 2012, up from $238,135 in April 2012. The average loan size for a refinance was $226,576, up from $219,664 in April. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.88% from 3.87%, with points decreasing to 0.43 from 0.46 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.12% from 4.13%, with points increasing to 0.41 from 0.35 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.71% from 3.70%, with points decreasing to 0.59 from 0.60 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages increased to 3.23% from 3.20%, with points increasing to 0.48 from 0.46 (including the origination fee) for 80% loans. At 9:30 this morning the DJIA opened -38, NASDAQ -12. The 10 yr at 9:30 +5/32 at 1.65% -1 bp and 30 yr mortgage price +3/32 (.09 bp) frm yesterday's close. At 10:00 April business inventories expected +0.2% increased 0.4%. Sales up 0.2%; the inventory to sales ratio 1.26 months. March sales were revised frm +0.6% to +0.2%. At 1:00 Treasury will auction $21B of 10 yr notes, yesterday's 3 yr note auction was OK but not real solid. The demand for today's 10 yr will be closely watched as an indication on whether investors are pulling back from the safety moves over Europe. Technically, the 10 yr note remains in bullish shape; as long as it doesn't climb over 1.70% the outlook will remain positive. A close over 1.70% on the 10 will likely temper the bullish view, however to change the longer term view the 10 would have to close over 1.76%. MBS prices also still technically bullish; the July 30 yr FNMA coupon must hold above 104.23 bp, presently 104.78 bp. At 10:00 this morning the 10 yr note was at 1.63%, a close under 1.60% would break the uptrend that has increased the yield for the last 8 sessions.