The market opened with European stock indices deep in the red on the back of Greek calls for a referendum on the bail-out program.

Treasury bonds surged in a flight to quality and the U.S. dollar strengthened further against the Euro as yields on Italian government bonds hit a record high at over 6%.

With so many headwinds coming out of Europe, U.S. Treasury bonds will remain relatively well bid.

In credit, flows were light but fast money (i.e. hedge funds) dominated what little flows there were, mainly through CDS (credit default swaps) as buyers of protection.

Bank CDS spreads were roughly +40 basis points wider and bank Tier 1 paper was shaking out more than 2+ points lower.

Whether or not the technical factors that contributed to the rally in cash bonds continue to hold through the month of November will be determined by headlines out of Europe.

The Greek referendum chatter is raising fears of a disorderly default as opposed to the orderly de facto EFSF / IMF backed default.

The referendum could be little more than political posturing, however, as Greek Prime Minister Papandreou faces riots on the streets.

The referendum could be phrased in such a way so as to guarantee passage i.e. "Do you want to go back to the chaos, instability and hyperinflation of the Colonels' era or do you want to maintain stability?"

From a Greek standpoint, a default without exiting the Euro is the ideal scenario; that is essentially what the Markozy deal offers the Greeks.

So it does not make sense that the Greeks would (rationally) back away from this deal.

Stocks initially got a bump higher off the lows as the Greek opposition challenged the referendum calls, confirming the political element.

While credit spreads widened out on light flows, given that dealer positions are light (a combination of the Volcker rule and balance sheet concerns), a gap tighter in spreads could be just as extreme as the widening on the right set of headlines out of Europe.

Regardless of how things shake out, November is likely to be a volatile month.

Beyond Friday's employment numbers, players will also watch developments leading up to the November 23 U.S. Congressional "Super Committee" deadline on $1.5 trillion in cuts to the deficit.

The FOMC (Federal Open Market Committee) rate decision is tomorrow.