To do anything other than to credit Europe with the bulk of this week's market-moving potential looks increasingly like folly.  Domestic events were of little concern on Monday with fresh Spain bailout news leading yields well lower overnight.  From there, not even a nearly $20 billion dealer offering at the Fed's 6-8yr Twist buyback was enough to coax yields back to previous all-time lows.  By the end of the day it was clear that Europe simply deposited safe-haven bond markets at new, lower all-time low yields, and from there, they simply "went to their corners."

In other words, the previous all-time low for 10yr yields had been 1.442.  Euro-drama overnight resulted in a drop to 1.399.  After hitting bottom, 10's simply, gradually, and methodically moved back toward the 1.442 level but clearly leveled off before breaking higher back into previous territory.

Whether or not this pivot point continues to get respect will depend on how well European news and events can keep up the downward pressure on rates.  Left to their own devices and in the absence of "concerning" developments, rates would likely drift sideways to slightly higher, but to whatever extent new and ever more stomach-churning headlines hit the wires for Europe, the "ratcheting" lower in yield could continue, or at the very least the ground-holding.

It might seem like Greece is a bit out of the spotlight at present, and that could prove to be true, but the Troika will be in Greece today and so there's potential at least for news from that old friend.  The rest of the European events on tap are economic releases.  As usual, if they build a consensus in one direction or another, it could inform where we open today.  From there, the domestic data and events are a bit lackluster FHFA House Prices at 10am and Markit PMI at 8:58am. 

Bernanke speaks in the morning, but on the topic of "Early Childhood Education" via prerecorded video, so little is exp3ected by way of QE3 hinting or even a Q&A of some sort.  In other Fed-related news, there's more Twist buying, this time in the 2036-2042 maturity range.  Finally, the week's Note auction cycle kicks off with 2yr Treasuries.  These haven't moved markets since before last summer, but for some reason, we feel compelled to mention them on the off chance they have a bearing on the realities of MBS-watching.

MBS Live Econ Calendar:
Week Of Mon, Jul 23 2012 - Fri, Jul 27 2012

Time Event Period Unit Forecast Prior
Mon, Jul 23
08:30 National Activity Index Jun -- -- -0.45
Tue, Jul 24
10:00 Rich Fed comp. index Jul -- -- -3
10:00 Rich Fed, services index Jul -- -- 9
10:00 Rich Fed manuf shipments Jul -- -- -2
10:00 Monthly Home Price mm May % -- 0.8
10:00 Monthly Home Price yy May % -- 3.0
11:30 52-Week Bill Auction -- bl 25.0 --
13:00 2-Yr Note Auction -- bl 35.0 --
Wed, Jul 25
07:00 Mortgage market index w/e -- -- 935.4
07:00 Mortgage market: change w/e % -- 18.0
07:00 MBA Purchase Index w/e -- -- 192.4
07:00 Mortgage refinance index w/e -- -- 5314.4
07:00 Refinancing: change w/e % -- 19.2
07:00 MBA Purchase: change w/e % -- 12.8
07:00 MBA 30-yr mortgage rate w/e % -- 3.74
10:00 New home sales-units mm Jun ml 0.372 0.369
10:00 New home sales chg mm Jun % -- 7.6
13:00 5-Yr Treasury Auction -- bl 35.0 --
Thu, Jul 26
00:00 Build permits R numbr mm Jun ml -- 0.755
00:00 Build permits R chg mm Jun % -- -3.7
08:30 Durable goods Jun % 0.5 1.3
08:30 Factory ex-transp mm Jun % 0.4 0.7
08:30 Nondefense ex-air Jun % 0.2 2.1
08:30 Initial Jobless Claims w/e k 380 386
08:30 Continued jobless claims w/e ml 3.310 3.314
10:00 Pending sales change mm Jun % 0.2 5.9
11:00 KC Fed manufacturing Jul -- -- 12
13:00 7-Yr Note Auction -- bl 29.0 --
Fri, Jul 27
09:55 U.Mich sentiment Jul -- 72.0 72.0
09:55 U Mich conditions Jul -- 82.8 83.2
09:55 U.Mich expectation Jul -- 64.4 64.8

* mm: monthly | yy: annual | qq: quarterly | "w/e" in "period" column indicates a weekly report

* Q1: First Quarter | Adv: Advance Release | Pre: Preliminary Release | Fin: Final Release

* (n)SA: (non) Seasonally Adjusted

* PMI: "Purchasing Managers Index" | CPI/PPI: "Consumer/Producer Price Index"

* TIC: "Treasury International Capital" report