Despite Friday's volatile move into weaker territory, recent bond market trading decisions have been surprisingly logical.  Arguably, we saw Friday afternoon's weakness because Friday morning was much stronger.  In short, markets moved to the skeptical end of the spectrum regarding a Greek deal in the morning, and then simply returned to Thursday's closing levels after the deal ended up coming together in the afternoon.  As I said on Friday morning, Greece 'folding' was priced in.  The longer they went without folding, the stronger bonds got, and when they ultimately folded, bonds snapped back to the 'priced-in' levels.

So why are we rehashing all that?  Simply put, because markets are continuing to trade this Greek bailout extension.  It started looking shakier over the weekend as Germany reminded markets that Greece's list of reforms might not pass muster at the 19 Eurozone governments that must ratify it.  Germany further clarified that failure to ratify this week would result in a significantly longer renegotiation process--one that would quite possibly extend past Greece's solvency.

Just now, Greece gave the world a heads-up that it would be late in getting today's reform list to the Eurogroup.  And once again, bond markets are trading the outlook for a legitimate Greek bailout extension.  Every time it looks more possible, bonds lose.  Every time it's called into question, bonds win.  Right now, they're winning, but cautiously.