MBS MID-DAY: 2/13/2012

Greece had been slated to announce the terms of Private Sector Investors' involvement in the bailout. This was expected to follow Wednesday's Eurogroup meeting and to indicate a hefty 70% haircut. Rumors that this announcement will not only be delayed, but could point to even bigger haircuts is currently fueling a bid in Treasuries, as well as the biggest pop of volume on the day.

10yr yields ticked into positive territory, down almost 1bp from Friday's latest levels at 1.9758, but not quite down to 3pm levels yet (1.969). MBS are a few ticks better than last check, currently up 1 tick on the day at 103-15, in the middle-to-high end of Friday's trading range.

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. The overnight session was not especially brisk in terms of volume or volatility. Because the Greece news was out by Sunday afternoon, we simply saw a moderate pop of volume at the European open, but this only equated to 10yr yields rising from 2.0 to 2.026.

That's because the passing of austerity, in and of itself, doesn't guarantee that the next aid tranche will be released. That fate is set to be decided on Wednesday at a Eurogroup meeting, which is incidentally a follow up to last week's similar meeting after Greece was unable to meet the austerity requirements to get approval.

MBS are holding their own in early trading with Fannie 3.5's on the verge of breaking even on the day, currently down only 1 tick at 103-13. 10yr yields are 1.25bps higher than Friday's latest levels at 1.9965. Despite a pull-back from overnight highs, S&P futures are still roughly 10 points higher versus Friday's close.

For the week's full economic calendar, see "The Week Ahead" below:

(Reuters) - Relief over the passing of sweeping austerity measures by the Greek parliament saw stocks and the euro gain on Monday, but with several issues still to be resolved before the shadow of a messy debt default is lifted, gains were fragile.

U.S. stock index futures pointed to a recovery for equities on Wall Street after delays in agreeing the Greek bailout deal last week caused the S&P 500 index to suffer its biggest loss of the year on Friday.

"People were losing patience with Greece. In the end they got their act together and it's definitely a positive," Markus Huber, head of German sales trading at ETX Capital, said.

Before Greece can secure a second rescue and get the $14 billion euros it needs to meet debt repayments due on March 20 it must still explain how a further 325 million euros ($428.6 million) of spending cuts will be reached, and give its nervous creditors binding assurances the full plan will be implemented.

The focus is now on a euro zone finance ministers meeting on Wednesday that is due to decide on approval of the next 130-billion euro aid package.