Core European debt markets set the tone for the overnight session.  That means German Bunds big rally helped US Treasury yields move lower overnight.  One of the key root causes for today's move is the same sort of EU contagion that was so prevalent back in 2012.  That dynamic saw peripheral countries' borrowing costs spiral higher, and the systemic consequences for the Euro currency fueled flights to the relative safety of "core" countries' sovereign debt--Germany being the benchmark.

This time around, the drama is relatively minor compared to the show put on by Greece 2, 3, and 4 years ago.  It concerns a Portuguese bank this time, and in the grand scheme of things, hasn't even come close to moving Portuguese sovereign debt yields as much as they moved in mere sympathy to Greece 2 years ago.  In fact, Portugal's 10yr is trading around 4% these days compared to 2012 when it moved from 17% to 7% through the course of the year.

It was enough for some overnight drama though.  The biggest consideration for US markets was Germany's run toward all-time lows.  They won't get there today, but at 1.17 vs an all-time closing low of 1.16, they got close.  That was around 7am, and yields have been trending higher ever since, albeit slightly.

Treasuries managed one more dip after the domestic open, but then joined in the gradual weakening that continues even now.  Day over day, both MBS and Treasuries are still in positive territory, but only with about half their original gains.