Treasuries and mortgages opened slightly weaker this morning with stock indexes a little better early on after the DJIA dropped 251 points yesterday. There are no data releases today and being Friday markets are likely to be rather mundane through the day. Late yesterday afternoon Moody's lowered credit ratings on 15 US and global banks, commenting the deterioration in debt quality has become worrisome. That Moody's lowered big banks hasn't caused any serious reaction, in fact after the ratings were announced the banks affected actually rallied in after-market trading yesterday. Moody's announced last February it was analyzing banks in the wake of Europe's debt crisis and originally the credit rating cuts were expected in May but Moody's is saying it delayed it to give additional time to do its homework. The idea is that with lower credit ratings borrowing costs would increase, in this case that isn't very likely as borrowing costs are so low and in some sense it is all relative in that most of the big banks fell together. One big bank commented the move was backward thinking as most banks that were cut were already beefing up their balance sheets. US banks downgraded; Citi, BofA, Goldman Sachs, JP Morgan Chase and Morgan Stanley. Moody's lowered rating based primarily on its outlook that global growth is declining. The evidence of global slowing continues almost daily; today German business confidence fell to the lowest in more than two years in June as the worsening sovereign debt crisis clouded the economic outlook. The Munich-based Ifo institute said today its business climate index, based on a survey of 7,000 executives, dropped for a second straight month to 105.3 from 106.9 in May. That's the lowest reading since March 2010. Yesterday a survey of purchasing managers showed German manufacturing is contracting at the fastest pace in three years. He strongest economy in the euro region is sliding rapidly as the EU struggles to find a plan to shore up banks in Spain and Italy, work out a plan to keep Greece from crumbling and help Ireland and Portugal. In Italy, an index of consumer confidence fell to 85.3 in June, the lowest since the data series began in 1996, from 86.5 in May. Next week (28th and 29th) the EU will hold another summit meeting to TRY to find a solution to Europe's debt and economic crises. The land of constant meetings continues with increasing loss of confidence that there is anything that will come of it. In the meantime the European Commission forecasts the euro-area economy will shrink 0.3 percent this year. At least eight member states are in recession. Spain's 10-year bond yield surged above 7 percent this month, the level that prompted Greece, Portugal and Ireland to seek bailouts. At 9:30 the DJIA opened +68, NASDAQ +10; the 10 yr note -13/32 at 1.66%. MBS 30 yr mortgage prices -4/32 (.12 bp) frm yesterday's close. Mortgage rates and treasury rates are confined within a narrow trading ranges. The bellwether 10 yr note since early June has stayed in a 10 to 12 basis point range with its 20 day average at 1.66% with the note at the moment at 1.65%, so far the 10 yr has note moved above its 20 day average on the yield since early April. 30 yr mortgages also holding its 20 day average on selling since early April. The relative strength index, measure of market momentum, on the 10 yr and MBSs remains slightly bullish. The Fed's extension of Operation Twist through the rest of the year announced on Wednesday, isn't pushing rates lower;$267B of buying at the long end of the curve isn't likely to have much impact. The direction for rates over the next month will be decided by what happens in Europe and the EU summit next week. IF, and it is a huge IF, somehow Europe develops a plan to keep banks from failing and finds a way to support the debt crisis US interest rates will likely increase a little as safety moves into US treasuries will be unwound.