Rates Holding but may give back some today

Look for the MBS Market to show weekness as stock prices rise

The Day Ahead: Reports of Stimulus Spending Give Stocks Boost Sep 7 2011

Strong GDP in Australia and rumors of a $300 billion jobs plan from President Obama have Treasury yields backing up and the stock market rebounding.

The 10-year Treasury yield moved five basis points up overnight to 2.03%, while the tw0-year yield held steady at 0.20% and the 30-year yield softened eight basis points to 3.35%.

S&P 500 futures are 13.5 points higher at 1,178.20 and Dow futures are 111 points up at 11,239. The ongoing European session has stocks 2% higher on average.

Real GDP in Australia expanded 1.2% in Q2, versus 1% forecasts, while revisions showed Q1 growth slowed by 0.9% instead of 1.2%.

Obama's jobs plan reportedly includes a $30 billion tax benefit for businesses that hire the unemployed, tax cuts, infrastructure spending, and more aid to state and local governments.

"The two central measures to be taken in the package will be a one-year extension of a payroll tax cut, and an extension of expiring jobless benefits," reports Politico. "The president will also continue, for one year, a tax break for business that allows them to deduct the full value of equipment."

In new data this morning, mortgage applications fell 4.9% last week, marking the the third consecutive decline according to the MBA. Refinancings were responsible for the tumble.

Meantime, light crude oil is 0.83% higher at $86.72 per barrel, while gold prices are 2.05% lower at $1,834.

Key Events Today:

11:15 - Richard Evans, president of the Chicago Fed, speaks on the economy and monetary policy in London.

2:00 - With little new data this week, a lot of focus could turn to the Fed's Beige Book for a comprehensive update on where the economy stands near the end of the third-quarter. The book offers an anecdotal look at the economy, as published by the 12 regional Federal Reserve branches. It's being compiled for the Sept. 20-21 monetary policy meeting.

"The pessimistic regional Fed surveys in August reflect the debt ceiling debacle, the ratings downgrade and coinciding stock market volatility," said Nomura Global Economics. "We expect a similarly negative portrait of the economy to be painted in the Beige Book. We expect anecdotes of firms exhibiting restraint - in both hiring and capital investment - to also crop up in a labor market whose outlook has dimmed."

4:00 - John Williams, president of the San Francisco Fed, speaks to the Seattle Rotary Club on Fed policy and the economic outlook.

• Treasury Auctions:
• 11:30 - 4-Week Bills ($30 billion)