Bond markets had already been on the ropes during the overnight session with 10yr Treasuries rising as high as 2.58 before the domestic open.  Some of the weakness came on gradually in futures markets over the course of the day yesterday as the European Central Bank's dovish policy move provided more benefit for equities markets than it did for bond markets.  The government debt most closely affected by ECB policy--German Bunds--rallied initially, but gave back more than half those gains by the end of their session.  Additionally, some of the global events that had contributed to a flight-to-safety (albeit in exceptionally low volume) during the first three days of the week, became less dire by varying degrees. 

While this may have been a mild detractor from US bond markets, it's also worth noting that 10's were almost perfectly in the middle of their post-FOMC range by the time NFP rolled around.  MBS  had done a decent job of fighting off the weakness and were "only" down about half a point to 100-16 in Fannie 3.5s.  But the employment data put on a clinic in terms of economic positivity--at least insofar as the payrolls data is concerned.  Here are the stats:

- June Payrolls +195k vs +165k Consensus
- May Revised to 195k from 175k
- April Revised to 199k from 149k
- Participation Rates 63.5 vs 63.4 previously
- Private Payrolls 202k vs 175k Consensus
- Work-week 34.5 vs 34.5

In and of itself, the 195k vs 165k is just "pretty bad" for bond markets, but the past revisions do just as much to tap in another nail in the coffin.  One of any number of things could be inside that coffin--mortgage rates in the 3's, 10yr yields in the 1's, chances for the Fed to hold off tapering past September, or even certainty the Fed won't accelerate tapering into July (though that one probably isn't in there).

Whatever the longer term implication may be, the short term reaction is bad.  10yr yields are now up to 2.68 and Fannie 3.5s are down to 99-20's.  For 10's, that's a POINT AND A HALF lower in price--for MBS, it's a point and quarter.  Losses could easily extend from here as it's easier for traders (who don't want to be here today any more than the rest of the world) to err on the side of weakness before packing up early to head home.  Late day price action stands a great chance to be low in volume and lacking in long term consequence in and of itself (it could merely be a sign of things to come depending on how next week goes, however).