From MBS Live this morning: It's ironic that the original lyrics to "Silent Night" were written in German ("stille nacht,") because our overnight sessions continue to be anything but silent with most of the would-be silence broken by the same language. If US markets aren't simply following German Bunds in uninspired trading, Angela Merkel or Schaueble or some other German entity is likely to be having an effect on where US Treasuries are moving overnight and less-directly, where MBS walk in the door for the NY Session. Last night was no exception.

Bond markets drifted aimlessly higher until Germany auctioned off 5-yr Bunds with better-than-previous results. That positivity was kicked into higher gear when the BDB, The German Banking Association (yeah, that would be GBA, right? But over there it's the Bundesverband deutscher Banken, we promise) popped off a few newswires including a comment that the situation in Greece was still explosive, and the more likely mover that the new financial transaction tax could reduce banks' earnings by 5-10 pct. 

The biggest moves of the morning (both in price and volume) came out of the Merkel/Monti talks just before the NY Open. The "biggie" was ostensibly Merkel's comment that Germany would be prepared to pay more capital into the ESM in order to "send a message" to markets. 

With some additional assistance from Fed-Speakers this morning (Lacker and Evans) volume has picked up to its best levels of the week. 10's are currently down just over 2bps at 1.942 and MBS a mere tick higher than their post-roll close at 102-27. The only "biggie" left on the domestic calendar is today's 10yr Treasury Auction at 1pm.