The week began fairly uneventfully yesterday as MBS essentially coasted sideways in a fairly narrow range, ultimately going out at similar levels to those seen Friday afternoon.  It was a similar story for Treasuries who may have coped with a bit more volatility on balance but made it back to positive territory just the same. 

Volumes were generally low though there was a healthier-than-usual increase in volume and price movement at 3pm following the release of a weaker-than expected Consumer Credit report.  That helped bond markets make their second "last stand" of the day at their weakest levels.  The first "last stand" came after the German constitutional court announced that they would, well, announce a decision as to whether or not the, um, decision on the ESM scheduled for Wednesday will be postponed due to recent gripes among German lawmakers.

Along with the FOMC festivities on Thursday, the German court ruling has been the other "biggie" of the week and if it doesn't end up happening (yet), the default implication is sort of Groundhog's Day of "six more weeks of economic uncertainty" as the Euro zone tries to flesh out who is getting whose money and under what bedingungen.  Sorry... did we just say bedingungen?  Innocent mistake...  Meant to say "under what CONDITIONS" but somehow we accidentally wrote "conditions" in German.  Also, the "six weeks" is simply a Groundhog's Day reference and nothing to do with how long it might actually take to come back to an ESM decision, though we'd hope it would be much faster than 6 weeks. 

The potential delayed voting news ends up making an appearance in today's news as it is the deadline given for the aforementioned decision on whether or not to postpone.  It's joined by the moderately relevant International Trade data in the morning of the domestic session, and before then by a reasonable offering of overnight data in Europe, including NFP in France, German wholesale inflation, and a speech later in the morning from prominent ECB board member Joerg Asmussen. 

The 3yr Auction hits in the afternoon, but considering that markets generally agree that the Fed is likely to extend the low interest rate verbiage in Thursday's announcement, 2 and 3yr auctions are likely to continue to have limited impact on MBS.  Keep in mind that it's "roll day" for MBS meaning light liquidity in the September coupons responsible for current price indications and an apparent "drop" in prices at the end of the day when we switch from viewing September's MBS prices to October's.