The Week Ahead: Holiday-Shortened, Europe Remains in Focus

Without any significant scheduled economic data, Monday provides an ideal opportunity to let European headline risk play out after a tentative Cyprus bailout deal was approved by EU Finance Ministers late Sunday.  Unfortunately, the resulting price action for MBS may be anything but ideal.  The extent to which this is the case, could change several times this morning depending on the bumps in the road, but in general, domestic bond markets only enjoyed last week's price levels because of potential failure to reach a deal in Cyprus.  The better the deal looks, the quicker we're likely to get back to previous ranges (which were characterized by tough resistance moving under 1.99% in 10yr yields and supportive ceilings around 2.08).

After Monday's data-free, headline-rich session, Tuesday brings in several economic reports as well as the start of the week's Treasury auction cycle.  Data includes Durable Goods, New Home Sales, and Consumer Confidence as far as market-movers are concerned, with Case Shiller Home Prices playing a supporting role.  None of these reports are guaranteed to have an impact--especially with European headline risk remaining present--but big misses or beats could cause shifts inside broader, EU-inspired ranges.

Wednesday is a fairly light day again for domestic data with only Pending Home Sales at 10am and the weekly MBA report on mortgage applications early--neither of which are market movers.  The afternoon, however, brings a more relevant auction with 5yr Notes at 1pm.  Thursday is it for the week.  After getting the final reading on Q4 GDP, Jobless Claims, and Chicago PMI, markets finish out a busy morning with an earlier-than-normal 7yr Auction in order to make room for the 2pm early close.  Despite economic data on the calendar, markets are closed for Good Friday, though banks and government offices remain open.