The Euro-zone/IMF approved 110 billion in aid to bail out Greece.  Germany’s cabinet approved the draft, allowing them to contribute to the fund as well.  The weekend news has been a rally maker for stocks and at the same time, pressured bonds, notes and mortgage backs right out of the gate.

Personal Income/Spending were also released, up .3% PI and up .6% on the Spending component.  Both numbers were a touch better than expected as consumers seem less pessimistic about the future job market.  Real disposable income however came in plus .2% which is on the soft side, reminding us that we’re still in a “less worse” phase of recovery.  ISM Manufacturing was also on the docket, positing a plus .8 to 60.4.  The gain reflects nine consecutive months of expansion and the fastest rate of growth since June 2004.  All three legs of this stool, new orders, production, and employment had nice gains.  Inventories will need to be watched closely as they still seem to be expanding with a slower run rate (draw down) than we would like to see.  This could be a drag into the second and third quarters.

Construction Spending was the last horse out of the gate, up .2% in March.  The better than expected print can be traced to public spending on infrastructure and construction projects which were up 2.3%.  Private Construction in the commercial sector is still feeling ill and will continue to be a headwind.

This week’s calendar is loaded with data.  Factory Orders, Housing data, ADP expectations, Productivity and Costs, and Big Daddy, the Employment Report for April on Friday will all give the markets something to chew on.  For now, we see a range trade developing on the 10 year note between 3.65% and 3.75% (currently at 3.70%).  With the 10 year off 12/32’s this morning and mortgage backs down 8/32’s, being a little cautious is not a bad thing.  We do however expect that a short term bottom is close and a range trade will develop until Friday’s Employment data hits the screen.  Stocks are up nearly 100 points on the big board.  That’s the main reason for the MBS “pinch” this.

Have a great week!