Believe it or not, this isn't the first appearance of the exact same "paradox" headline. That's because The Durable Goods report has some significant components beyond the headline and because of its implication on GDP. This time around, the culprit is the same as it was in March (last time that headline appeared): Nondefense Capital Goods Orders Excluding Aircraft.
While the current report came in at +1.4 vs a forecast of +0.5 (a 0.9 beat), the last report was revised from +0.7 to -1.2 (a 1.9 decrease). Economists/Analysts/Trader teams will have already baked in their forecasts to next week's GDP expectations, but can't bake in revisions until their known.
As such, today's Durables data leaves a net loss of 1.0 in that 'Nodefense Ex-Air' segment, which is a fairly substantial negative mark against next week's Q2 GDP. And that's why bond markets improved despite the stronger headline ("headline" refers to overall Durable Goods at +0.7 vs +0.5 forecast).
Before that, both Treasuries and MBS were in moderately weaker territory. Fannie 3.5s are now up 3 ticks at 102-07 and 10yr yields are down 1.6bps at 2.493.