This morning's alert from MBS Live!:

Bond Markets Near Unchanged. New Gov For Greece. Italy Takes Torch 8:48 AM

Looking at trading levels this morning in MBS, it almost looks like nothing happened over the weekend. Things are relatively flat with the whole stack 1-2 tick in the red at the moment versus Friday's latest levels, which were also some of the highest. So Fannie 3.5's being down 2 ticks isn't so much of the story compared to the fact that they trade at 102-03 currently--higher than 80% of Friday's action. 

Truth be told, it was a fairly uneventful weekend. For all the fuss made about Greece heading into the weekend, the fact that the end result was that Papandreou's ruling party scraped together "pass" of their confidence vote and then moved to call the formation of a "unity government" seems to have been expected. In fact, the buzz this morning, if anything, focuses more on Italy where there are to be more confidence votes and potential resignations/oustings of leaders. 

There's no notable data on the economic calendar today and tomorrow's first major piece of data won't hit until 1pm with the 3yr note auction. Given this week's auction cycle and the fact that bond markets generally trade on the more bullish end their recent range, we're feeling a bit guarded against auction concessions combined with the possibility that the Greek gov reshuffling could be seen as increasingly positive. So we'd look for locking opportunities with 3.5's over a 101-25 level.

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If anything, bond markets are in just slightly better shape than that 8:48am alert, but for instance, MBS are only 1 tick better (1/32nd in price from 102-03 to 102-04).  Both MBS and Treasuries are thus far stonewalled by resistance although 10yr yields look to be testing that resistance now:

One contributing factor in the bond markets' ability to trade on the better side of recent ranges could be stock markets under pressure this morning.  Although the stock lever certainly disconnected heading into the weekend, it's been in the process of hooking back up this morning and 10yr yields have benefitted:

That move down in stocks is well within the context of a trendline that has persisted since mid-October:

10yr yields on the other hand, are a bit more of a mixed bag.  whatever the case, it seems like a band of yields from 2.11-2.13 constitute the major dividing line between October's ugliness and November's purgatory.  (NOTE: no derogatory implication for MBS, which would be just fine with TSYs at current levels.  We'd have plenty of room to tighten primary/secondary spreads if benchmarks settled down a bit in this range):