Today clearly contains the highest magnitude of domestic economic reports this week.  With volumes having been between 20-40% of recent averages over the past few days, perhaps this will be enough to get us closer to 50%?  If such a feat is possible, it would likely rely on some ongoing reaction to the key event from the overnight session: Italian sovereign debt auctions.  These auctions went off generally within the realm of expectations, but Italian spreads to German Bund benchmarks nonetheless widened slightly, effectively proving that domestic 10yr yields rallied just about the right amount yesterday (irrespective of the motivation). 

Things are opening up fairly flat with 10's currently just over half a bp lower at 1.9145 and Fannie 3.5 MBS 1 tick better at 102-19.  S&P futures are a few points higher.  The first data arrives in moments with Jobless Claims at 8:30am.  Markets aren't expected to react too severely to a data set that's notorious for volatility around the holidays, instead preferring to focus on the 9:45am Release of Chicago PMI (seen at 61.0 vs a previous 62.6.  After that, Pending Home Sales hits at 10am with a forecast for a +2.0% increase versus a previous 10.4%.  Keep in mind that this is effectively the last day of the week for many a market participant with tomorrow being a half day ahead of a 3 day weekend.

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