Thursday brings the first of the week's major considerations for bond markets in the form of not one, but THREE Central Bank announcements.  Although Japanese monetary policy has been a recently more pressing matter for global markets, the main event is the ECB Announcement at 7:45 and more appropriately the press conference with ECB President Mario Draghi beginning at 8:30am.  Emphasis is on the press conference today because the ECB isn't likely to announce any new policy measures, but may hint at the near-term willingness to do so via the press conference.  Draghi will read the prepared announcement first and then begin fielding questions.  Relevant headlines will be streaming in over the ensuing hour with any mention of Italy being of particular importance.

One of the most sensational eventualities of the press conference would be if the yet-to-be-used "OMT" bond buying program (read more) is discussed in any other context other than for Draghi to say Italy must adhere to austerity if there's any hope of the ECB buying their debt (read more).  Even then, the mere reminder to markets that the ECB might even consider buying Italian debt under the right circumstances could be a net positive for peripheral spreads in Europe and a net negative for US rates.  The more forceful the reminder, the bigger the potential effect. That's not to say that the OMT discussion is the only market mover Draghi could bring to the table.  While he's not known for telegraphing future moves, the topic could come up of a potential rate cut at the next meeting. 

In addition to the other two prominent Central Bank announcements overnight as well as the trove of economic data in Europe, there's also a moderately brisk day of domestic economic data with Productivity/Costs, Initial Jobless Claims, and International Trade.  In a shocking display of "when it rains, it pours," ALL THREE of those reports are released at the same 8:30am time that Draghi begins his press conference.  Looming as a pervasive shadow over all the preceding events, the Employment Situation occupies the same time-slot tomorrow.

The following chart of 10yr yields represents "the fear," that the recent time spent under 1.95 was a fleeting reaction to an Italian situation that might not prove to be as awful as the last Italian situation.  If that happens to continue to be the case, and if ECB and NFP move against us, then 1.95 will probably look very low very quickly.  Note that markets have quickly gotten back in position ahead of the ECB, ready to "forget" about Italy (or "be reassured" about Italy, perhaps)--essentially shouting out "PROVE IT!" to the past week and a half spent in the pre-LTRO range.