MBS Day Ahead: Action-Packed Week: More Greece, Then Yellen and Data

The current week begins with what may amount to some simple housekeeping for the Eurozone as Greece submits the list of reforms it's been working on over the weekend as a part of Friday's bailout extension agreement.  It could turn out to be something more than housekeeping if Eurozone leaders deem it insufficient.  In that case, the can would be kicked in an even more can-kicky way than it was on Friday as Eurogroup finance ministers would have to set yet another meeting to attempt to hammer out the 4-month can-kick that was provisionally approved on Friday.

In other words--and this is perhaps the best run-on sentence analogy for current Greek drama--Europe said Greece will still be able to collect its allowance even though it got in trouble, but Greece has to go to its room over the weekend, think about what its done, and come up with action steps to show that it's committed to going to its room for another 4 months and working on an even bigger set of action steps to show that it's committed to doing the bare minimum required to maintain its allowance, and nothing more.  Sounds like a joke, right?  But no one's laughing.

Monday is theoretically the deadline for this list of action steps, but we haven't been definitively told whether or not the Eurogroup will sign off on it the same day.  Hopefully they make a decision today, because the plot thickens tomorrow with the 1st of two congressional testimonies from Fed Chair Yellen.  Whereas last week's FOMC Minutes (which were friendly for us) were the product of a meeting that occurred before the last big jobs report, this week's minutes will give Yellen a chance to address whether or not the data changes the outlook. Knowing the Fed's history of disregarding single, recent instances of economic data that breaks the mold, it would be a real shock if she gave a substantially different view than the one conveyed in the Minutes.  For the record, the Minutes generally suggested rate-hike patience.

There are several economic reports on that can have some effect during the first 3 days of the week, but the focus will be on the bigger-ticket events above.  Come Thursday, the data takes center stage.  Conveniently, the week's most capable reports are also concentrated on the last 2 days.  With 2/5/7yr Treasury auctions running from Tuesday through Thursday, and with Friday being the end of the month (additional trading needs), this has the potential to be a pivotal week in confirming the long term downtrend (the one that took over in mid 2014, and that we're hoping still holds after February's significant weakness).