Higher than expected growth in China has global investors in a better mood Wednesday morning, with Treasury yields backing up and equity futures looking to recover from losses earlier in the week.

The 10-year Treasury yield is up five basis points at 2.93% in early trading, while the two-year yield is two basis points weaker at 0.38% and the 30-year Treasury yield is five basis points weaker at 4.22%. The August delivery Fannie Mae 4.0 MBS coupon is performing well though, currently only -2/32 at 100-24 after going out at 100-26 yesterday afternoon.

China's National Bureau of Statistics reported a 9.5% growth rate in the second quarter, handily beating consensus forecasts and calming fears of a global slowdown. The Q1 growth rate was 9.7%. China's industrial production index also showed a 15.1% year-over-year growth rate in June, with retail sales up 17.7%.

"The Chinese data should allay fears of a hard landing in China," said economists at BMO Capital Markets.  "If the solid June figures persist, that would flag continued strong growth in Q3. However, the strong data mean we could see China tighten policy a little further to control inflation since growth doesn't appear to be an issue."

The S&P 500 looks to open 5.25 points higher at 1,316 and Dow futures are 38 points higher at 12,450. In the first two days this week, the Dow shed 210 points, a 1.66% loss.

One thing not helping equity markets: the latest weekly survey from MBA. Mortgage applications fell 5.1% in the week ending July 8, with purchases falling 2.6% and refinancings - which accounted for 65.6% of all application - dropping 6.2% to mark the fourth straight drop. 

The average rate for a 30-year mortgage fell 14 basis points to 4.55%.

Key Events Today:

9:10 - Eric Rosengren, president of the Boston Fed, speaks on the economic outlook.

10:00 - Fed chairman Ben Bernanke testifies before the House Committee on Financial Services at the Semiannual Monetary Policy Report to the Congress in Washington.

Nomura notes this is Bernanke's first appearance since his June 22 press conference. 

"In the wake of the very weak June employment report, his testimony is likely to reflect heightened concerns about the 'frustratingly slow' labor market recovery," they wrote  "As in the last meeting in March, he will likely emphasize the importance of improving the long-term fiscal situation, and encourage the House to raise the debt ceiling. That being said, he may suggest withholding fiscal tightening in the near term."

1:00 - Treasury auctions $21 billion 10-year notes.

1:20 - Richard Fisher, president of the Dallas Fed, speaks on the economy.

2:00 - June is a month that typically sees a surplus in the Treasury's Budget Statement but this time economists look for a $60 billion deficit. According to Bloomberg, the 10-year June average is a $4.2 billion surplus, but over the last five years there's been an average June deficit of $162 billion, including a $68.4 billion gap in June 2010.

"Treasury data show that receipts ran about flat in June compared with June 2010, while outlays were 11% higher," said forecasters at Nomura. "Based on these data, we expect a June budget deficit of -$69.7 billion compared with -$68.4 billion in the same month last year."