Stocks and Greece are supporting the fixed income market today as the big board trades in negative territory and Greek bonds blow out to 411 bps over the German Bund. Word has it that Greek banks have asked the government to use the remaining 17 billion Euro of funds allocated to back up the country’s banking system to be put to work as a government guaranteed bond program. The move would allow for a better haircut when borrowing from the European Central Bank. Trouble is, Greece still need more money to float the country and skeptics are abound, still viewing them as the poster child of the PIGS nations.
Front and center today will be 21 billion of 10 year treasury notes up for auction. Results will be out at high noon cst and could be a big market mover. Greece and current yields should support the auction. The big bet is to see who shows up (or who doesn’t) to buy the paper. The tactical bias is for a neutral/supportive trade with investors looking to buy weakness and sell strength as valuations are attractive at current levels (10 year yield at 3.96%).
For the bears, which are in control, to really get this thing moving would need to trade above 4.01% on the 10 year note. Bond bulls need a trade below 3.91% to take the heat off. As you can see, we a caught in the middle. Buckle up as volatility will shift a gear in about 45 minutes.