The Week Ahead: Treasury Auctions, Moderate Econ Calendar, Euro Headline Potential

The week promises to be a relatively busy one, even if it's being kicked off with a quiet overnight session.  Japan was out on Holiday and with little to drive trading in the overnight session, volume has been understandably low.  In fact, Monday is generally set-up to be the slowest day of the week with only 3pm Consumer Credit adorning the domestic economic calendar.  Beyond that, ongoing details of a scheduled meeting between German Chancellor Angela Merkel and France's PM Sarkozy are the focus of the day.  More European events follow later in the week including Italy's PM Monti meeting with Merkal on Wednesday, and an ECB rates meeting on Thursday.  

Greece is very much back in the spotlight as fresh debate over previously determined haircuts threaten the country's very Euro-membership.  News out over the weekend indicated the IMF is losing confidence in Greece's ability to clean up it's mountain of debt.  "  Citing an internal IMF memo, the news weekly said the body considered Greece's current readjustment programme insufficient and that new measures would have to be taken if the country is to avoid default and meet targets agreed with creditors."

In separate, but related news, Oxford Professor Clemens Faust opined on the haircut issue, saying "this (50 percent) rate was accompanied by the idea it would be associated with a long-term economic consolidation programme, which would reduce the accumulated debt to 120 percent of the annual gross domestic product in 2020, but such a reduction is not enough. We had already (a debt of) 120 percent at the beginning of the crisis. So the reduction must be higher than 50 percent."  Early newswires from today's Merkozy meeting suggest that dealing with this latest iteration of the Greek tragedy is their focus.  Nothing more than generic soundbytes thus far.

Throughout the rest of the week, a certain measure of focus may actually be reserved for domestic events!  The biggest buzz of the week's domestic economic calendar looks to be Thursday's Retail Sales, but we'll also get Business Inventories (GDP component) and of course, Jobless Claims, followed by Friday's International Trade data, Import/Export Prices, and Consumer Sentiment.  The central 3 days of the week will host 3, 10, and 30yr Treasury auctions respectively with the latter two being of chief importance to MBS trading.  Interspersing the aformentioned events are various earnings reports that could help or hurt as far as the stock lever is concerned. 

Fannie Mae 30yr Fixed MBS have kicked off the day relatively flat at 103-02, down 2 ticks from Friday's 5pm levels.