The first of the wires below from Reuters isn't meant to ruffle any stateside feathers. We don't need to be too indignant about it, but it's yet another interesting example in a pattern of "deflection" concerning the EU Debt Crisis (most recently, the S&P downgrade of France that prompted Francois Baroin to "remind" that the S&P was "the same agency that downgraded the US."

• RTRS - BANK OF ITALY SAYS EURO DEBT CRISIS, UNCERTAINTY OVER US PUBLIC FINANCES HITTING GROWTH PROSPECTS
• RTRS - BANK OF ITALY SAYS SEES SIGNS THAT WORLD TRADE SLOWED IN FOURTH QUARTER
• RTRS - BANK OF ITALY SAYS SEES DIFFICULTIES IN GOVT SECURITIES MARKET BEING TRANSMITTED TO SUPPLY OF CREDIT TO ECONOMY
• RTRS - BANK OF ITALY SAYS IMPORTANT THAT STRENGTHENED EFSF AND ESM ARE ARE MADE RAPIDLY OPERATIONAL
• RTRS - BANK OF ITALY SEES ITALY GDP -1.5 PCT IN 2012, ZERO GROWTH IN 2013 IF ITALY/GERMANY 10Y SPREAD STAYS AROUND 500 BPS
• RTRS - BANK OF ITALY SEES ITALY GDP -1.2 PCT IN 2012, +0.8 PCT IN 2013 IF ITALY/GERMANY 10Y SPREAD NARROWS BY ABOUT 200 BPS
• RTRS - BANK OF ITALY EXPECTS ITALY ECONOMY CONTRACTION TO DEEPEN IN Q4 AFTER SHRINKING 0.2 PCT IN Q3
• RTRS - BANK OF ITALY SEES SIGNIFICANT RISK OF WORSENING IN CREDIT QUALITY DUE TO ECONOMIC SLOWDOWN

Wells Fargo & Co., the largest U.S. bank by market value, posted a 20 percent increase in fourth- quarter profit, beating analyst estimates, with the company citing a boost from mortgage financing.

The company originated $120 billion in mortgages in the fourth quarter, up from $89 billion in the three months ended September. Net interest margin, the difference between what the bank pays for funds and what it earns on loans and securities, climbed to 3.89 percent from 3.84 percent in the preceding quarter. (Bloomberg)

Between the charts' determination to stay within the limits set on Friday, the relatively immediate correction from earlier weakness back to the center of Friday's ranges, and the steady, healthy volumes, trading so far this morning seems like it's more about getting caught up with yesterday's day-off than it is about trading any major events or expectations

There were some economic reports out of Europe last night as well as some comments from ECB Nowotny concerning future possibilities of Eurobonds. A few of these ostensibly coincided with swings in the price action and upticks in volume, but nothing close to what we normally see when we're talking about European events moving markets overnight.

Note on this morning's charts that MBS have risen and flattened out at roughly the same levels that they fell to and flattened out around on Friday afternoon. With only 2 days surrounding September's FOMC announcement standing as the exception, Fannie 3.5's are essentially operating at their all time highs, defined by a narrow range of 103-08 to 103-13. We do seem to be having a bit of trouble getting back over 103-08 this morning, but we're not in any rush to see more choppy swings.

Treasuries meanwhile have been going through the same motions as MBS, quickly returning to the center of Friday's range, but similarly stymied by resistance. For 10yr yields, that's been something just over 1.87, which is both a short term pivot point from yesterday and a long-term pivot of high importance, having acted on a few occasions as either an outright roadlblock, or line in the sand, below which, things have begun to look panicky and unsustainable (although it bears mentioning that we traded below there on Friday and in late December without that sort of panic, so the accepted realities could simply be shifting).

Data through December 2011, released today by S&P Indices and Experian for the S&P/Experian Consumer Credit Default Indices, a comprehensive measure of changes in consumer credit defaults, showed that most loan types saw an increase in default rates during the month. Bank card default rates were the only to decline, from 4.91% in November to 4.60% in December. Second mortgage default rates increased to 1.33% from 1.26%, auto loans default rates increased to 1.27% from 1.17% and first mortgage default rates increased to 2.19% from 2.17%. The increases in first and second mortgage and auto loans rates caused the national composite to rise from 2.22% to 2.24%, its highest rate since April 2011.

“Led by the mortgage markets, the second half of 2011 saw a slight reversal of the two-year downward trend in consumer credit default rates,” says David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Indices. “First mortgage default rates rose for the fourth consecutive month, as did the composite. Since August, first mortgage default rates have risen from 1.92% to the 2.19%. The composite also rose those months, from 2.04% to 2.24%. The recent weakness seen in home prices is reflected in these data. Bank card default rates, on the other hand, were favorable, falling to 4.6% in December. This is more than a full percentage point below the 5.64% we saw as recently as July 2011.

The Empire State Manufacturing Survey indicates that manufacturing activity expanded in New York State in January. The general business conditions index climbed points to 13.5. The new orders index rose eight points to 13.7 and the shipments index inched up to 21.7. The prices paid index was positive and slightly higher than it was last month while the prices received index jumped twenty points to 23.1, indicating a significant pickup in selling prices. Employment indexes were positive and higher, pointing to higher employment levels and a longer average workweek. Future indexes conveyed a high degree of optimism about the six-month outlook, with the future general business conditions index rising nine points to 54.9, its highest level since January 2011.

On a series of supplementary survey questions, 51 percent of respondents indicated that they expect their workforces to increase over the next six to twelve months, while just 9 percent predicted declines in the total number of workers—results noticeably more positive than in the June 2011 survey. The current results were slightly more positive for larger establishments (150 or more employees) than for smaller ones. High expected sales growth was widely deemed to be the most important factor among those who planned to add workers. When asked about anticipated changes in wages per worker, 80 percent of respondents indicated that wages would increase by less than 5 percent and almost all of the remaining 20 percent said wages would stay about the same. When asked about changes in benefits per worker, however, a sizable proportion, 37 percent, estimated that increases would exceed 5 percent.