Mortgage investors are putting the finishing touches on their risk management strategies in front of this week's three-part, $99 billion Treasury debt auction. The process will kick-off tomorrow with $35 billion of 2-year notes on the auction block followed by $35 billion of 5-year notes on Wednesday and concluding on Thursday with $29 billion of 7-year notes. The yields on these securities are flirting with 60-year lows -- so reasons for investors to step up and buy will need to be very compelling. If demand is soft at this week's government debt sale look for the upward pressure on mortgage interest rates to increase.



The biggest event on this week's schedule is Fed Chairman Ben Bernanke's Friday morning address to attendees at the Fed's global banking conference in Jackson Hole, Wyoming. Bernanke is expected to acknowledge his disappointment over the pace of economic growth -- but the probabilities remain low he'll provide any new guidance on a new round of monetary stimulus. If my assessment proves accurate, it's a perfect recipe for a churning, range-bound trading environment for both stocks and bonds. Heads up.