The Week Ahead: Domestic Data, Possible Greek Bailout Approval

Bond markets begin the week in slightly worse territory than Friday's after Greek parliament voted to approve the austerity measures requisite for the country's bailout funds.  But in and of itself, the passing of austerity doesn't guarantee the release of Greece's next aid tranche.  That fate is set to be decided at a Eurogroup meeting on Wednesday.  Incidentally, a similar meeting stood out as an important economic event last week, but Greece was unable to reach a consensus on requisite austerity measures.  As a results, this week's meeting was announced as a follow-up, ostensibly allowing Greek political leaders an opportunity to get on the same page.  (As a bit of an aside, recall that Greece's PM Papademos last week said that any members of the government who didn't support austerity measures could not remain in the government.  That's one way to get on the same page).

In conjunction with determining Greek bondholder's private sector involvement, this meeting is shaping up to be the focal point of the week, with the assumption being more pronounced weakness ahead for bond markets if the deal manages to get approved.  The parliament vote, which merely "keeps hope alive" as it were, has already lifted stock futures to their highs of the year and brought 10yr yields back over 2%, currently 2.2bps higher from Friday at 2.005.  MBS are moderately lower, just on the low side of Friday's range, down 3 ticks at 103-11. 

Vying for the attention of market participants will be a robust week of domestic economic offerings with Monday standing as an exception to an otherwise busy calender.  There are no significant pieces of economic data set for release today, so we're left to watch the unfolding drama that may arise over the Greek austerity approval and anticipatory buzz over Wednesday's voting.  

The first report of the week, Retail Sales tomorrow morning at 8:30 AM Eastern, is also the most important in terms of domestic data.  We could well imagine some tough moments ahead for bond markets this week if the Greek deal is approved AND economic data on the home-front is on the strong side.  Whether or not those "tough moments" mean that the 10yr benchmark rises above last week's high yields near 2.08 remains to be seen, but we'd certainly be prepared for that possibility.