Treasuries and mortgages started weaker this morning but managed to crawl back to unchanged by 8:45. Early this morning the DJIA futures traded up 114 points, by 8:45 up 64 points. At 8:30 revisions to Q1 productivity and unit labor costs; productivity was revised to -0.9% frm -0.5% reported on the advance report last month, consensus was for -0.7%, unit labor costs were revised from +2.0% to +1.3%, consensus was for +2.2%. The bond and mortgage markets continued to improve as stock indexes edged back off the early highs; by 9:00 the 10 yr note +4/32 and MBS prices +4/32 (.12 bp) frm yesterday's closes. By 9:30 the DJIA opened +84, NASDAQ +23; the 10 yr note lost ground, -5/32 at 1.59% +2 bp and MBS 30 yr price -2/32 (.06 bp); some volatility already this morning. ECB's Draghi said the economic outlook in the euro area faces "increased downside risks." The ECB left interest rates unchanged at its meeting today. With European governments struggling to fix a crisis that's hampering Spain and could force Greece out of the euro, economists say the ECB may soon be forced to lower rates and introduce more liquidity support for banks. "We continue to expect the euro-area economy to recover gradually," Draghi said at his press conference. Draghi said officials will extend their offerings of unlimited cash until the start of 2013 for periods up to three months as they try to head off risks stemming from the euro region debt crisis. "We have decided to continue our main refinancing at fixed rate, full allotment for as long as necessary" and at least until January. German stocks pared their advance after Draghi' s comments, also weakening the US indexes prior to the 9:30 open. The weekly MBA mortgage applications out this morning; the overall index up 1.3%. The purchase index fell 1.8% in the June 1 week and is back at its lowest level since mid-April. Low rates are a plus for purchase demand and are definitely stimulating refinancing activity. The refinance index rose 2.0% in the week and is at its highest level since February. Refinancing made up more than 3/4 of the week's mortgage activity. The week's average 30-year fixed rate is a record low of 3.87 percent (conforming balances under $417,500). At 2:00 this afternoon the Fed's beige Book will be released. Always gets attention, the Book is used at the FOMC meeting in two weeks. Tomorrow Fed chief Bernanke will testify at the Joint Economic Committee in Congress. Markets will look ahead to his testimony and likely will not see a lot of change today in the bond market. Both stocks and bonds are continuing their corrections to over extended levels; stock indexes were very oversold while the bond and mortgage markets equally overbought. There isn't any major changes in the overall sentiment, just consolidating and waiting for news out of Europe. Greece elections on the 17th and Spain's increasing bank problems. No progress in Europe, a lot of meetings but no consensus on what to do to keep the EU together and come to any plan to deal with growing debt issues. The stock market remains bearish and the bond and mortgage markets bullish. After a little two way trade in the bond market early this morning, the 10 yr and mortgages are weakening as stock indexes continue to rally. In the U.S., Federal Reserve Bank of Atlanta President Dennis Lockhart said extending Operation Twist, the program to lengthen maturities of debt on the central bank's balance sheet, is an "option on the table." "There is capacity to do more, so it is an option on the table," he remarked.