This Week; as you know its all about the debt ceiling and the on-going troubles in Europe with potential defaults on debt in Italy, Greece, Spain, Portugal and Ireland. The 10 yr note yield will likely increase today as politicians have not yet come up with a plan that will allow Treasury to avoid default on the 2nd of August. There will however be a plan and the US will not default, but now what the deal may look like still begs the question whether the rating agencies will lower the US bond rating from AAA to AA2. There are some that believe even with the very weak deal being hammered out it won't be enough to keep the credit rating to be lowered.
 
The week has Treasury borrowing another $99B with auctions of 2 yr notes Tuesday, 5 yr notes Wednesday and 7 yr notes on Thursday. The Fed's Beige Book is out on Thursday and the first look at Q2 GDP on Friday with the advance report. We remain skeptical that interest rates will move much lower from the present levels; however all our technicals remain bullish as the week gets under way.