Yesterday's Recap

- Low Volume

- Prices rallied between 0.5 and 1 point

- Spreads slightly tighter

- Dow finally sees some decent selling, down almost 200 pts

- NAHB a bit more cautious versus recent months

The AM So Far...

- 10 yr Tsy up to 3.77, 15 ticks down in price.

- MBS Down around 3/8 of a point in the lower stack and 5.0's, taking us nearly back to yesterday's open.

- May housing starts up 17.2%

- PPI Core down .1%, headline up +0.2% versus +0.6% consensus

- Financial Times reporting:

The Treasury plans to force lenders to retain at least 5 per cent of the credit risk of loans that are securitised, ensuring that they have what investors call "skin in the game". The 5 per cent rule - which looks set to be applied in Europe as well - is less draconian than some bankers feared. The proposed elimination of "gain on sale accounting" is to prevent financial companies from booking paper profits on loans - packaged into securities - as soon as they were sold to investors.

- Industrial Production still to come at 9:15

- Non-Data Market Mover Of The Day: Congressional Hearing On Systemic Risk

Charts

2s/10s: 250bps

6/12 EFFECTIVE FED FUNDS:   +0.05  to  0.22 from 0.17

LIBOR FIXINGS

O/N LIBOR:     +0.0000   to  0.2612   from  0.2612

1 MONTH:       -0.0006    to  0.3181   from  0.3187

3 MONTH:       -0.0013    to  0.6131   from  0.6144

6 MONTH:       -0.0050    to  1.1638   from  1.1688

1 YEAR:           -0.0025    to  1.6962   from  1.6988