MBS Day Ahead: Time to Build a Case for Change of Pace in 2015?

Greece voted overwhelmingly in favor of accepting the bailout terms negotiated this past weekend.  The vote took place after the closing bell yesterday, and bond markets did very little with the news.  This is rather surprising at first.  Why aren't we seeing a bigger reaction?

Heading into either of the past two weekends, I think if we'd seen more resolute steps taken in either direction (with respect to Greece), bond markets were indeed ready for bigger action. If Greece hadn't returned to the negotiating table and simply taken their chances with 'Grexit,' I'm guessing we'd easily be pushing the lower boundary of the recent rate range.  Conversely, I think without a referendum 2 weeks ago and without the new caveats over the past few days that rates would be moving much higher if a bailout was more resolutely accomplished.

And that's really the problem today, when it comes to expecting Greece's vote to move bond markets: it doesn't even begin to resolutely accomplish a bailout and a bailout doesn't begin to resolutely accomplish a long term solution for Greece and the broader concerns it keeps in the back of the Eurozone's mind. 

For starters, other Eurozone parliaments have yet to ratify the bailout terms.  Greece did, but Germany hasn't.  We might expect another bump in rates when that happens, but such threats are looking more and more contained by the hour.  Another nagging issue is the fact that Greece doesn't have money to pay its bills between now and the time that this new bailout is finalized (Germany isn't even expected to vote until Friday at the earliest). 

So there's the need for bridge financing  in order for the most crucial payment to be made to the ECB on July 20th.  Incidentally, this July 20th business is not a new thing.  As I said 3 weeks ago, the real drama starts if Greece misses that July 20th payment.  Conversely, the real sigh of relief can't be breathed until they shore up the cash to make that payment.  That could happen soon (EU officials are discussing it today, in fact), but it hasn't happened yet.

Meanwhile, we have more domestic data on tap and another round of Yellen testimony.  With multiple sources of inspiration competing for market attention, I'm more an more inclined to retreat to the refuge of a technicals (that means "just looking at charts and trading levels) to assess the current state of affairs.  In that regard, it's notable that we're currently looking at the best case for a bounce that we've seen since March. 

Really, the only majorly disconcerting technical development would be a break above June/July high yields.  Until/unless we see that, we've just been digging in our heels to defend the line at June's weakest levels.  We'll take this one day at a time, but can certainly say "so far so good" given what we've recently endured without much threat to the range.  (NOTE: this isn't to say the 2015 uptrend is defeated, simply that  we might finally get a run to the lower end of that uptrend).