Stock market volatility continues at high levels. This morning the US stock indexes were weaker early after a nice rebound yesterday that followed a huge 266 point decline for the DJIA on Monday. Today there isn't any economic data to look at, this afternoon the Fed will release its Beige Book, details from all 12 districts.

Europe's stock market were weaker again this morning; the fourth day the markets have fallen. Talk the Germany's credit rating may be downgraded increased trading volatility in the country as well as through the EU countries. Investors increasingly more concerned that Germany's economy is slowing, driven lower as the rest of the EU has shown very little growth. Credit downgrade rumors, the fall in gold and surprisingly weak China Q1 GDP are collectively increasing the uncertainty in equity markets. As we noted Monday volatility in global markets will increase as investors consider the validity of the current stock market rally. The volume of shares changing hands in Stoxx 600 companies was 3.6% greater than the average of the last 30 days.

U.K. unemployment rose at its fastest pace in more than a year and wage increases slowed. Unemployment as measured by International Labor Organization methods rose by 70,000 to 2.56 million in the three months through February, the most since November 2011, the Office for National Statistics said today in London. A separate release showed that Bank of England Governor Mervyn King was defeated for a third month in a push for more stimulus. Here in the US the Fed is openly talking about the end of its QE; no time frame and likely not anything immediate, now the UK has rejected an increase in stimulus.

The weekly MBA mortgage applications released at 7:00 am this morning. Mortgage applications increased 4.8% from one week earlier. The Refinance Index increased 5% from the previous week and is at its highest level since mid-January of 2013. The seasonally adjusted Purchase Index increased 4% from one week earlier is at its highest level since May of 2010 and the adjusted Conventional Purchase Index increased 3% to the highest level since October 2009. The unadjusted Purchase Index increased 5% compared with the previous week and was 20% higher than the same week one year ago. The refinance share of mortgage activity was unchanged at 75% of total applications from the previous week. The adjustable-rate mortgage (ARM) share of activity was unchanged at 5% of total applications. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.67% from 3.68%, with points increasing to 0.50 from 0.43 (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 3.77% from 3.79%, with points decreasing to 0.27 from 0.36 (including the origination fee) for 80% loans.

At 9:30 the DJIA opened -40, NASDAQ -28, S&P -7. At 9:30 the 10 yr note at 1.72% -1 bp and 30 yr MBSs -3 bp frm yesterday's close.

Is the 10 yr note losing some of its safety haven characteristics? In the last seven trading sessions, a week and a half, the 10 has found strong support at 1.70% and has equally found resistance at 1.75%. Five basis points and finding no momentum to crack 1.70% levels. During that time the DJIA has had swings from -266 on Monday and +157 yesterday. China's economy slowing, Europe's economies faltering, gold falling and still investors and traders appear to be reluctant to move into treasuries. With weakening economic outlooks from increasing numbers of economists the Fed is not likely to begin lessening its monthly purchases of treasuries and mortgages anytime soon---at least until the end of the year; nevertheless interest rates are holding firm. Technically, everything remains positive but unless the 10 breaks 1.70% soon interest rates may increase.

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