Between the healthy dose of domestic economic data, tradeflow considerations, and European Central Bank (ECB) Announcement, this week will set the tone for the rest of the year's interest rate momentum.  But the first order of business will be to assess the extent to which last week's rally was one of those all-too-common Thanksgiving week snowballs.  More often than not, they're unwound in the following week, so it will be informative if that's not the case this time around.

If there's one really compelling reason to believe that recent resilience and positivity has been more than mere randomness, look no further than European markets.  Europe's 10yr benchmark (German 'Bunds') rallied the entire month of November and actually hit record lows by the end.  We've seen the tango in the chart below time and again where US Treasuries look to be lifting off only to get pulled back to earth by a more compelling move in Europe.

The biggest news of the week for Europe will be the ECB Announcement and press conference on Thursday morning.  The meatiest bits of those events tend to occur after 8:30am eastern time, and can even be in progress after some of the earlier morning rate sheets have printed.  The ongoing point of contention for the ECB concerns direct purchases of sovereign debt.  It's something that hasn't happened yet, but is increasingly seen as a possibility.  Chances are low that such a thing would be announced this time around, but markets tend to be willing to react to merely convincing hints.

Even though it reserves the right to be, Europe isn't the only show in town, and couldn't possibly be until Thursday.  Between now and then there will be several important economic reports, beginning with today's ISM Manufacturing Index.  This is often the 2nd biggest market mover of any given month (next to NFP) when it comes to economic data.  And if it doesn't have much of an impact, we'll only have to wait until this Friday for NFP itself! 

Beyond the data, we're also interested to see who is trading and why.  Corporate debt issuance continues to cause both positive and negative volatility for Treasuries and that should continue this month.  Last week's run to recent rate lows could greatly accelerate issuance plans (corporations would like to lock in borrowing costs at low rates).  Beyond that, we need to see if there's any additional push back against last week's rally.  If not, that would be a strongly positive comment on the longer-term trend.