The ill effects of having political headlines account for a large part of trading guidance today is evident on the charts. Granted, the headlines out of Greece were of a different sort than the domestic debt debate, but headlines are headlines. Given the choice, we'd prefer to have scheduled economic events driving trade. Tomorrow should provide that opportunity with plenty to go on. Case Shiller Home Prices are out at 9am--not a huge market mover always, but one of the most interesting industry-specific reports we get each month. The market movers show up at 10am with Consumer Confidence and New Home Sales. State Street Investor Confidence Index is also out at 10am and occasionally produces noteworthy results, depending on the degree of variance from previous reports. Tomorrow is also the start of the week's Treasury Note Auctions with the 2 yr note results reporting at 1pm. Then the soon to be retired Hoenig will regale audiences with some version of the extreme hawkishness for which he is known at 2pm. Take a look at what the various forecasts for these reports are, and much more, here:

After the most recent bout of fast-paced selling (just after 2pm), MBS and Treasuries have finally found some support. Still, damage was done, and Fannie 4.0's crossed the 3pm line at 100-14 after having traded at 100-19 before the fall. 10yr Notes made a few tries at breaking into the 2.96's during that same time, but now find themselves at 3.00. So it's somewhat of a crapshoot as to how the reprice outlook has been shifted by recent market movements, if at all. You'd have to use a bit of deductive reasoning if you're really on a fence about a lock right now. Generally though, if a lender priced earlier and poorly, there could still be a reprice for the better out there. If a lender priced later in the morning, after MBS began rising, or if they repriced for the better, and if either of those were on the aggressive side, a reprice for the worse wouldn't be out of the question in those cases. Sadly, with a Boehner press conference coming up at 4pm, there are yet more opportunities for volatility in the last few hours today. We'd recommend disregarding today and picking it up fresh tomorrow, with Econ Data and a Treasury Auction on tap. These headlines today have been like some sort of pharmaceutical that is best taken with a full meal. Without some economic report or other meaningful economic events to digest, these little pills throughout the day have been nauseating on several levels, not the least of which being the volatile MBS prices.

10yr yields have risen a few bps and Fannie 4.0 MBS have fallen quick 4 ticks after an official from the Institute of International Finance said that Greece's debt deal provides the country a much greater opportunity to rebuild a strong base of creditworthiness. 10's just broke over 3.0and Fannie 4.0's are down to 100-13. This is confounds the previous reprice outlook. Things had been going well and several reprices for the better had been reported. In fact, they may even continue to trickle in. But this current weakness needs to be watched closely. If it doesn't bounce back fairly quickly, some of the lenders who just repriced for the better might get second thoughts. Lenders who haven't repriced for the better are not as likely to be considering repricing for the worse.

(Reuters) - Republicans in the U.S. House of Representatives will push legislation to cut $1.2 trillion in spending over 10 years and provide a short-term, $1 trillion increase in the government's borrowing limit, a Republican aide said on Monday. House Speaker John Boehner, who is crafting the legislation, also wants to trigger automatic deficit-reduction cuts if spending exceeds caps created by the legislation, the aide said. President Barack Obama, a Democrat, has said he is opposed to a short-term debt limit increase and instead wants about $2.4 trillion in new borrowing authority, which would extend through 2012. The Boehner plan, like a competing one being written by Senate Democrats, would not contain any tax hikes in the drive to reduce federal budget deficits that have been hovering around $1.4 trillion a year. But the Republican plan is slightly more ambitious in trying to nail down over the next several months an additional $1.8 trillion in savings beyond the initial installment of $1.2 trillion. The Democratic plan envisions $2.7 trillion in total savings. Both plans might not pass muster with credit ratings agencies, which want firmer commitments from Congress for about $4 trillion in long-term savings. (Reporting by Andy Sullivan and Richard Cowan)

(Reuters) - U.S. banking regulators expect to release proposals for replacing the work of credit rating agencies in their regulations later this year when comprehensive proposals on tougher capital standards are unveiled, the Federal Reserve said on Monday. Credit rating agencies, such as Moody's Corp and McGraw-Hill Cos' Standard & Poor's, have been criticized for fueling the 2007-2009 financial crisis by assigning gold-plated ratings to securities that proved to be far more risky than advertised. In response, the 2010 Dodd-Frank financial oversight law requires regulators to strip from their regulations the reliance on credit rating agencies' work to determine such things as capital requirements for banks based on the riskiness of their assets. In a report to Congress released on Monday, the Fed said that banking agencies are still working to find alternatives to the credit raters' work, a daunting task that has proven to be difficult for banking agencies. The Fed said regulators expect to propose alternatives later this year when they unveil rules for implementing tougher capital requirements for banks required by Dodd-Frank and the recent international agreement known as Basel III. (Reporting by Dave Clarke; editing by Matthew Lewis)

(Reuters) - Get them while they're hot. Or not.Investors will have their last chance this week to buy U.S. Treasuries directly from the government before the August 2 deadline for raising the U.S. debt ceiling and staving off a possible credit default.The Treasury will auction a total of $99 billion of two-, five- and seven-year notes on Tuesday, Wednesday and Thursday, respectively.While most investors believe Republicans and Democrats will reach a last-minute deal that eliminates the potential for a U.S. default, the idea of buying an IOU from an entity that might soon miss payments on its loans is a strange one for investors. Whether buyers will step up "is so hard to say because we have never really been here before -- most of us don't really believe that they are going to allow the debt to default," said David Coard, head of fixed-income sales and trading at The Williams Capital Group in New York.He notes the three auctions all settle on August 1, a day ahead of the deadline laid out by Treasury Secretary Timothy Geithner for the United States to run out of money to pay its debt if the $14.3 trillion debt ceiling is not extended."In the absence of a new agreement, I don't think there would be any question about this debt because it does settle before August 2," Coard said. Expectations the government will stave off a default had most investors thinking this week's auctions won't be a total disaster. But with Treasury note yields holding not far off their lowest levels this year, buyers will likely be looking to shave an edge off prices. "In general, there's still good demand for Treasuries but I do think that as the week progresses, traders could become increasingly uncomfortable with the level of uncertainty in the market, which could lead to more of a concession before the auction or at least some volatility around the time of the auctions," said Rich Bryant, senior vice president of U.S. Treasury trading at MF Global Securities in New York.

To say that recent trading in MBS and Treasuries is better than it was this morning is a vast understatement. Prices are way up, and the choppiness has toned way down. The MBS chart is starting to look like it sometimes does just before the first few aggressive lenders reprice for the better. Fannie 4.0's are now down only 3 ticks on the day at 100-19 and the 10yr is at 2.977. Both have shown technical signs that they are trending positively now after the opposite being true earlier this morning. That would stand to reason given that technical support was a likely motivator to fight back from today's weakest levels. So even though it might not happen just yet, unless things worsen very soon, there's a chance that a few lenders may reprice for the better. As is usually the case, we'd need a combination of 2 things in order for more lenders to get on board with that: A) time spent holding gains at the very least, but preferably combined with B) some additional gains.

(Reuters) - Moody's cut Greece's credit rating further into junk territory on Monday and said it was almost certain to slap a default tag on its debt as a result of a new EU rescue package. It was the second rating agency to warn of a default after euro zone leaders and banks agreed last week that the private sector would shoulder part of the burden of a rescue deal that offers Greece more cash and easier loan terms to keep it afloat and avoid further contagion. "The announced EU program along with the Institute of International Finance's statement implies that the probability of a distressed exchange, and hence a default, on Greek government bonds is virtually 100 percent," Moody's said in a statement.Bank lobby IIF, which led private sector negotiations, aims to attract 90 percent investor participation in the bond exchange plan which comes on top of the EU's new 109 billion euro bailout. Moody's cut Greece's rating by three notches to Ca, just one notch above default, to reflect the expected loss implied by the proposed debt exchanges. Greece now has the lowest rating of any country in the world covered by Moody's, which, like Fitch last week, said it would review Greece's rating after the debt swap is completed.

The somewhat tepid recovery that had been taking shape in MBS and Treasuries just took a quantum leap forward on one of any number of recent headlines, as well as technical support buying after 10yr notes made a serious intermediate term "double top" around 3.03 earlier. Certainly, Moody's warning that they may cut ratings of several Greek banks kicked things off in a friendly direction around 10:30. Then there's a rumor of a suspicious package in DC (In ADDITION to whatever shape the debt-ceiling spending cut package is currently taking!) that at least one trader is citing for an acceleration of the rally. But let's not get ahead of ourselves... MBS and TSYs touched Friday levels and have settled back down into the red already. The net effect is a Fannie 4.0 coupon that's about 6/32nds better than it was, but still 5 ticks lower on the day at 100-16. 10yr notes are down to 2.988, but have been moving higher after earlier bouncing at 2.95. Big moves. Fast Moves, but too fast and volatile for a reprice implication, or even much of a suggestion as to how things will shake out. Looks like they're getting weaker though. We'd hope to see a pivot in 10yr notes around 3% (it was resistance this morning, now hoping for support), but all we can do in that regard is just wait to see if it holds. IF it does, it could pave the way for a more sustainable mild recovery from previous weak spots today, and maybe even a positive reprice later on.