Bond markets experienced almost the full spectrum of February's range last week, with 10yr yields moving from the lows of the range, to the highs, and back to the middle as things wound down. Of course, that move back to the middle was actually "early March," but even so, it mimicked two similar moves in February that--taken all together--look like 3 similar waves of price action.
Whether or not similar "waves" continue into this first full week of March seems as if it will have the most to do with two key events. Naturally, there's Friday's Employment Situation Report seen rising 210k versus last month's +243k. And then there's Greece. Despite the burgeoning levels of Greek-headline exhaustion, markets continue placing great important on the eventual outcome of the current bailout efforts, and yes, they're still very much ongoing.
Previous meetings, conference calls, votes, and approvals have all been well and good in that they've determined that Greece has done what it needed to do in order to secure bailout funds. But this week brings us to the lynch-pin to all of the above: Private Sector Involvement. The one major contingency in release of the bailout funds is a certain level of participation among Greek Bond-Holders who have been asked to voluntarily accept a 53.5% haircut on their Greek debt.
If too small a portion of the private sector refuses, then Greece is expected to activate "collective action clauses" which stipulate that even if a 2/3rds majority of bondholders agree to the haircuts, then they'll apply to the rest of the private sector as well. Such an event opens the door for credit-default-swaps to be invoked. Although the International Swaps and Derivatives Agency said that the bond swap itself didn't trigger CDS's, the same might not be true for the activation of the collective-action clauses.
Given the recent relatively contained market-based reaction to Greece's bailout developments, we get the sense that markets are very much waiting to see how the this keystone falls into place (or crumbles, as the case may be). The deadline for private bond-holders to signify their participation is March 8th, merely 1 day before the week's other major market mover, Non-Farm Payrolls. It goes without saying that the last two days of the week could be the biggest movers.
There are two domestic economic reports this morning as well, both at 10am. January Factory Orders are expected to have fallen 1.5% after rising 1.1% in the previous month and February's ISM Non-Manufacturing Index is seen falling to 56.1 after a 56.8 reading last month.
Tuesday will be light, with nothing significant in terms of Econ.
Wednesday brings ADP Private Payrolls at 815am, Productivity and Costs at 830am and Consumer Credit at 3pm.
Thursday, apart from being the Greek bond swap deadline, also sees Initial Jobless Claims at 830am
Friday's 830am NFP will be joined by an also important International Trade report at the same time, with Wholesale Inventories following at 10am.
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