Treasuries were weaker overnight, and in such a way that suggested organic selling pressure. In other words, US bond markets weren't simply weaker because they were following the crowd, but of their own volition (or traders' volition as the case may be). That may sound a bit ominous, but given that it's the first day of a new month and quarter, it could simply be bit of a redistribution of buying and selling demand into the new quarter.
Whatever the case may have been, both MBS and Treasuries entered the domestic session in weaker territory, erasing about half of yesterday's gains. MBS held sideways while Treasuries weakened a bit more. The 'close-to-expected' results in the ISM Manufacturing data resulted in the final push into weaker territory and bond have been holding their ground since then. MBS are outperforming with Fannie 4.0s back to within 2 ticks of 'unchanged.'
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