Bond markets improved overnight and may have a familiar friend to thank for it.  Greece is back in the news, or at least we think so...  We haven't seen or heard much on it yet, but Greek news ekathimerini.com reports that the extended period for private-sector bondholders to acquiesce to the much-discussed bond swap expires today.  Separate, but unconfirmed reports suggest that Greece will activate collective action clauses as planned.  Whatever the true case may be, we can at least conclude that SOMETHING must be transpiring for Greece's 10yr yield to be up a full 100bps overnight.

That's likely giving a bit of a lift to bond markets and indeed, 10yr yields domestically rallied in a fairly good correlation to the Greek 10yr sell-off.  Domestically, 10's opened in the 2.24's, which is technically a test outside the important 2.26-2.29 range seen in the chart below.  We can't really view this as a serious breakout test until we've had some more time to see if it develops today (not to mention that it would need confirmation next week),

Despite current levels and recent positivity, we'd be impressed and somewhat surprised to see 10's make a pronounced break lower today.  To whatever extent they retreat into the equivocal safety of the 2.26+ zone, the more it would put pressure on the 102-10 technical level in MBS (Fannie 3.5's).  MBS opened with a few choppy trades between 102-13 and 102-16, but are already down to 102-12.

The only hope for a pronounced rally beyond current levels would likely have to find motivation from something outside the scheduled calendar of events today.  It's quite light, and rather insignificant.    The lone piece of of economic data is New Home Sales at 10am.  After falling 0.9% last month, Sales are expected to have risen 1.2% this month to an annualized pace of 325k units.  Any way you slice it though, they're just bouncing along the bottom (though this is admittedly better than what they were doing before that!):

Just after New Home Sales, another round of scheduled Fed Twist buying commences in 2036 to 2042 maturities.  That will conclude at 11am and given the relatively light volume today, could cause some more pronounced volatility than other Twist buying operations this week.  

Bernanke speaks at 1:45pm at a Federal Reserve Bank conference and Lockhart speaks at 2:40pm.  But it's a Friday afternoon on the east coast, and we expect volume to have died down by then, limiting the impact of Fed speakers in the PM.