Good Morning Rate Watchers.

It's going to be a busy day. We've got New Home Sales at 10am. The U.S. plays Algeria for a chance to move onto the knockout round. $38 billion 5's go off at 1pm. The FOMC statement will print at 2:15pm. And both stock and bond markets are teetering on a range breakdown that would lead to louder discussion of a DOUBLE DIP.

I wouldn't say a double dip is totally dependent on the health of housing but the subject is clearly perceived by markets as one of the WEAKEST LINKS in the long-term recovery outlook. I feel the industry's tallest hurdle lies in the process of rebuilding the total credit profile of American homebuyers. That is unless banks start buying less restrictive product. We all know that market will be tough to make, but there are opportunities, especially after the implementation of new QC initiatives. (performing approve/ineligibles!).

THIS IS WHAT I THINK THE FED WILL SAY ABOUT HOUSING TODAY

Stock futures are trading modestly higher in light volume ahead of New Home Sales data. S&Ps are currently bid +3.25 at 1093.75.

The benchmark 10yr TSY note yield rose a few bps in low volume last night as stock futures meandered off the lows. 10s didn't venture too far from yesterday's close though, currently spotted +0-01 at 102-28 yielding 3.159%. BANG BANG ON RANGE RESISTANCE....

Mortgages have opened flat in price and wider in yield spread. The JULY FN 4.0 is -0-02 at 100-22 and the JULY FN 4.5 is +0-01 at 103-09. The secondary market current coupon is 0.7 of a bp higher at 3.925%.Yield spreads are about 2bps wider vs. duration adjusted benchmarks.

Lenders are delaying the release of loan pricing until the market makes a directional move around 10am. If New Home Sales disappoint, stocks will turn south as expected and rate sheets will improve as withheld rebate is passed along. READ MORE