The bond and mortgage markets continue to trade quietly with little change this week ahead of the EU summit beginning tomorrow. The stock indexes a little better early on as May durable goods orders were better than thought. Durables up 1.1% with forecasts of +0.5%; ex the volatile transportation orders up 0.4%, less than 0.7% expected. April ex transportation orders were revised from -0.9% to -0.6%. Growth is cooling as a slowdown in global markets emanating from Europe harms exports and curtails equipment spending, hurting sales at manufacturers. At 9:30 the DJIA opened +45, NASDAQ +12; the 10 yr note at 9:30 +1/32 at 1.62% while mortgage prices were down 1/32 (.03 bp) frm yesterday's close. Italy's 10-year bond yield fell three basis points, or 0.03 percentage point, to 6.15%, after rising to 6.20%, the highest level since June 14. Spain's 10-year yield declined two basis points to 6.85%, after jumping 49 basis points over the past two days. Spain and other countries are going to push for measures to bring down borrowing costs when European Union leaders meet for a two-day summit starting tomorrow in Brussels. German Chancellor Angela Merkel said today issuing common bonds is the "wrong way" to achieve the greater integration needed to resolve the debt crisis. She said Spain was right to request for help for its banks and Italy was on path to growth. Merkel has caused tension among EU members by resisting calls for joint euro bonds. Germany's 10-year bund yield climbed four basis points to 1.55% after dropping to 1.46% two days ago, the lowest level since June 19. It wasn't too long ago that the German 10 yr traded 30 basis points lower in yield than US 10s, now just 7 bps lower. Merkel said that euro bonds, euro bills and debt redemption funds are unconstitutional in Germany and economically "wrong and counterproductive." The EU summit appears to be an attempt to get euro bonds to take the heat off Spain and Italy as well as other debt ladened countries in the region. "I fear that at the summit there will be much too much talk about mutual liability and far too little about improved oversight and structural measures," she said. "Oversight and liability have to go hand in hand. There can only be joint liability when adequate oversight is ensured;" Germany isn't about to tie itself to poorly managed countries. "The sovereign debt crisis shows us daily that deficiencies in one euro-zone country can cause difficulties in the entire euro zone," Merkel commented. "It also shows us that national answers aren't enough to secure the euro area's stability." The summit isn't going anywhere as long as Germany doesn't get its way. The NAR reported May pending home sales up 5.9% with forecasts of an increase of 1.0%. Much stronger with strength coming from the West where prices are increasing in places like Phoenix and Las Vegas. Yr/yr pending home sales up 13.3%. On the news the stock market increased a little but the bond and mortgage markets showed no reaction. This afternoon Treasury will auction $35B of 5 yr notes; yesterday's 2 yr was OK but not unusually strong; the 5 yr may also have a little less bidding today. Mortgage applications decreased 7.1% from one week earlier, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending June 22, 2012. The Refinance Index decreased 8.0% from the previous week. The seasonally adjusted Purchase Index decreased 1.0% from one week earlier. The refinance share of mortgage activity decreased to 79 percent of total applications from over 80 percent the previous week. The adjustable-rate mortgage (ARM) share of activity is about 4.0% of total applications. 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 0.40 from 0.49 (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) increased to 4.12% from 4.06%, with points decreasing to 0.35 from 0.38 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.71% from 3.72%, with points decreasing to 0.46 from 0.47 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.24% from 3.25%, with points decreasing to 0.44 from 0.45 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs increased to 2.81% from 2.75%, with points increasing to 0.41 from 0.33 (including the origination fee) for 80% loans.