Last Week; interest rates on treasuries increased, the 10 yr note yield jumped 12 basis points, mortgage rates however remained generally unchanged. The week brought the Greece deficit into full focus early in the week generating a little safe haven buying in treasuries but it didn't last long as markets quickly realized the European Union would put a plan ion place to keep Greece from defaulting on its debt. Spain and Portugal are also being observed closely as their financial conditions are not much better than in Greece. The take away from the revelations that sovereign debt among many nations is still on the edge of breaking down; not what markets need now as the debate about recovery is heating up.. Last week had very little economic releases from which to measure economic conditions. The week's major headline was the quarterly refunding by Treasury; it sold $81B of 3 yr notes, 10 yr notes and 30 yr bonds. The 10 and 30 yr auctions were not up to recent standards of strong bidding, but were not failures. China's decision to increase their bank reserves by 50 basis points was met with concern in the US that Asian counties may try to slow growth rates that have escalated to increase concerns over inflation.

 
This Week; unlike last week there are a number of economic reports that will draw attention; no Treasury borrowing but on Thursday treasury will announce the following week's borrowing, 2 yr notes, 5 yr notes and 7 yr notes will be sold. Wednesday Jan housing starts and permits, starts will likely be up while we expect permits to have declined after a big jump in Dec. Most of the economic data this week will be on the manufacturing and business sectors with industrial production and factory use for Jan and the key Philadelphia Fed business index expected to be a little better. Interest rate remain tethered to a narrow range for mortgages, moving in a 10 basis point yield range; all focus is on the equity markets with a growing outlook of a major correction coming. That said, the equity markets Rate Alert have been looking for a correction for the past month but so far nothing; a day or two of selling then a day or two of rallies keeping the key indexes from and serious declines. It is overdue, we expect the stock market will deliver a huge decline but as long as traders see any decline as a buying opportunity no big sell-off is likely.