It was an average overnight session in terms of volume an volatility, ultimately resulting in 10yr yields hitting 2.3828 around 6am before cascading down to 3.35 for the New York open. MBS begin the day 4 ticks improved with Fannie 3.5's at 101-30 and S&P futures are down about 4 points since yesterday's close.
One of today's key events had some measure of wind taken from its sails late yesterday as Bernanke's testimony on Europe was released early. His conclusion gives a good sense of the tenor:
The recent reduction in financial stresses in Europe is a welcome development for the United States, given the important trade and financial linkages connecting our economies. However, Europe's financial and economic situation remains difficult, and it is critical that the European leaders follow through on their policy commitments to ensure a lasting stabilization. I believe that our European counterparts understand the challenges and risks they face and are committed to take the necessary steps to address those issues.
For our part, the Federal Reserve will continue to monitor the situation closely, work with our financial institutions and foreign counterparts to enhance the resilience of our financial system, and be ready to use our tools to help stabilize U.S. markets should the situation require such action.
Thank you. I would be pleased to respond to your questions.
Even so, the Q&A to follow can't be released early, so we'll have that to look forward to following the 9:30am testimony. Shortly thereafter, the only significant piece of scheduled economic data hits in the form of Existing Home Sales at 10am, seen rising to an annual rate of 4.62 mln after last month's 4.57 mln.
Other potential market movers include scheduled Fed buying in the 2018-2020 maturity range from 1015am-1100am. None of the events today are likely to compete much with what have been the dominant forces of late: technicals and tradeflows. As we noted yesterday and beyond, when this is the case, it puts us in a position of observation and reaction, frustrating as it may be.
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