Very early this morning there was more strong selling in the treasury and mortgage markets, but by 9:00, although weaker most of the price declines come off their lows. Mixed picture out of Europe this morning; French and Spanish markets trading higher while Germany is lower, London closed again today celebrating Queen Elizabeth's 75 yr. Treasuries declined after Dallas Federal Reserve President Richard Fisher today voiced doubts about the central bank's Operation Twist program. "It's time for the market to send us a signal what the price of debt should be. What we're doing with Operation Twist is distorting the price," Twist will expire at the end of this month, there is still talk that the Fed may ease again; we still don't get it though. What good will another easing do? It won't motivate hiring, it won't solve the global economic decline that is dragging the US down, and there is little need for lower interest rates. Nevertheless there are more than a few economists and pundits that believe another easing move is in order. Treasuries and mortgage markets were under pressure earlier this morning as traders were waiting for a statement from the phone meeting held by the G7; at 9:15 the group announced there would be no statement at the conclusion of the talks. The mortgage market traded -8/32 (.25 bp) early rebounded a little on the news of no statement; the 10 yr note had been down 12/32 at 1.56%, it eased to -6/32 at 1.54% at 9:20. So far this morning the bond and mortgage markets are exhibiting increased volatility on news events. News from Europe: German Chancellor Angela Merkel said systemic banks may need supervision at the European Union level. The U.K.'s credit rating was cut one level to AA- by Egan-Jones Ratings Co. on concern the nation will be unable to continue reducing its budget deficit as the economy weakens. Euro-area services and manufacturing output contracted in May. A composite index based on a survey of purchasing managers in both industries dropped to 46 from 46.7in April, compared with an estimate of 45.9 published on June 1. The measure has remained below 50 -- indicating contraction -- for four months. An index of Germany's services industry based on a survey of purchasing managers dropped to 51.8 last month from 52.2 in April, Markit Economics said today. A measure of the industry in France slipped to 45.1 from 45.2 the previous month. Finance ministers and central-bank governors from the G-7 countries will hold a call today to discuss the euro area's sovereign-debt crisis. Germany's 10-year bond yield fell one basis point, or 0.01 bp, to 1.20%, approaching the record 1.127% set June 1. There's at least a one in three chance of Greece leaving the euro area within months of a June 17 election that may halt its international bailout, Standard & Poor's said. At 9:30 the DJIA opened -25, NASDAQ -9; 10 yr note -7/32 at 1.55% +3 bp and MBS 30 yr prices -4/32 (.12 bp). Here in the US, at 10:00 the May ISM service sector index, expected at 53.0, increased to 53.7 frm 53.5 in April; new orders component at 55.5 frm 53.5, prices pd at 49.8 frm 53.6, employment was a drag though, 50.8 frm 54.2. The initial reaction put a little additional pressure on the bond market and increased the stock indexes. After the weak manufacturing data last Friday the improvement in the service sector was nice to see but the overall levels of the indexes is still not showing any substantive growth. Looking ahead; on Thursday Federal Reserve Chairman Ben Bernanke testifies before the Joint Economic Committee on the economic outlook in Washington. Likely a number of questions about Europe and whether he is thinking about another Fed easing move. There isn't likely to be any surprises in his testimony but whenever he goes to Congress there is plenty of attention devoted to what he says. In the meantime, tomorrow the Fed Beige Book will be released, the Fed's details on the state of the economy frm the 12 districts. Europe still dominates global interest rate markets with no actual improvement in the outlook. Talk that there is movement toward a unified banking system to shore up banks on the edge of failure are making the rounds but unless Germany gets on board it won't happen. June 17th is fast approaching for Greece's next election on whether to accept the austerity conditions levied on it in order to get the money to keep it from defaulting on its sovereign debt. The backup ion US rates is mostly technical as the decline in rates was too rapid and needing some consolidation.