MBS Pricing Snapshot

Remember the "Choose Your Own Adventure" books? Today's moderate bond market gains are suggesting a similar directive--something to the tune of: "choose your own market-mover." Bond markets are in noticeably better territory with MBS up over a quarter point and 10yr Treasuries closing in on a 5bp drop. With respect to those gains, we've heard/seen several overnight or ongoing events discussed with varying degrees of importance and attribution.

For starters, news outlets have given an increasing amount of coverage to elections in the Catalonian region of Spain. In short, quite a few Catalonians want to secede from Spain and Spain isn't too fond of the idea. The bond market implication is a simple "political risk/uncertainty" bid for safe-haven Euro zone bonds which tend to improve in concert with US Treasuries.

From the relatively complicated topic of election politics in a regional Spanish government, we move to relatively less complicated "stuff," also getting some attention. This includes weaker Italian Consumer Confidence numbers out overnight as well as mere generalized anxiety ahead of potential agreement on Greek debt-reduction terms, which is the next requirement for a much-needed disbursement of Greece's next tranche of bailout aid.

One of any several ancillary supportive tidbits can be thrown into the mix here, including domestic concerns like our own generalized anxiety about the Fiscal Cliff, as well as a simple technical correction from a holiday week that saw bond markets drift to weaker levels in low volume. It's not that volume is that much better this morning. It's still relatively low compared to pre-holiday trading, but that should continue to change as the week progresses toward "month-end" on Friday and as the data and auction cycle ramps up throughout the week.

There hasn't been any significant data on the agenda this morning and there isn't anything in terms of economic reports for the rest of the day. That said, markets are still waiting for word from the Eurogroup meeting regarding Greece. Despite the fact that Greece is an ongoing study in can-kicking, this still has the potential to move markets today. An inked bailout agreement is likely to weigh on bond markets to some extent whereas a delay would likely help maintain the positivity.