Monday was relatively frustrating in the sense that MBS markets were moving--mostly down--and without the normal level of correlation to news/data and related markets.  Bond markets in general, were disconnected from the "stuff" to which they've been generally well-connected of late, such as the Euro, equities to a certain extent, and especially German Bunds. 

That's not to say that correlation was 100% absent, but noticeably lessened, to say the least.  The light calendar of scheduled events played into this and specific to MBS, heavy supply  kept constant pressure on prices, but was especially noticeable in the absence of Fed-buying in the afternoon.  We're hard-pressed to think of another day in recent memory with higher volume of new originations, with over $4 bln just in TBA MBS.

Today again, the economic calendar is light, with just ISM Non-Manufacturing printing at 10am.  There's Fed-Speak from Fisher early (7am), and a round of Fed 'Twist' buying at 10:15 in the pertinent 2020-2022 maturity range, but that's it for the morning hours.  Fed's Bullard speaks at 2:15pm on the topic of housing, but  unless he has a michevious look on his face and is holding a loosely tied bag that seems to be purring and meowing, we wouldn't expect major MBS movement to ensue.

Tuesday's biggest buzz is perhaps over the 'emergency' conference call between G7 finance ministers (read more HERE).  Of course, if it was super duper emergency, they'd be on the phone now, wouldn't they?  So, take it with a grain of salt, but someone might say something important, either supporting or arguing against Germany taking over Europe.  Ok, so maybe that's not the actual thesis, but considering the theme of Germany suggesting that other member nations cede some level of autonomy in order for a better band-aid to be put on the Euro-zone crisis, it's not completely inaccurate.