Today's economic data hasn't had much of an effect on bond markets, but with the morning activity now in the rearview, the effects look slightly more positive than negative. 

There really wasn't any discernible reaction to the 8:30am Productivity and Costs data, despite it being the biggest miss of the day.  Rather, it was the 8:15am ADP Employment Report and the 10am ISM Services index that garnered a response.

The ADP data was unequivocally positive for bonds, but the major caveat here is that the positivity was unequivocally tiny--too tiny to make a meaningful dent in yesterday's weakness.  Not only that, but it was quickly erased by corporate bond announcements, which carry a negative connotation for Treasuries.

By 10am, the corporate bond issuance was just about wrapping up for the day and ISM data came out with a stronger-than-expected headline.  That made for an initially weaker move in bond markets, but the "employment" component of the ISM data was weaker than expected.  With NFP coming up on Friday, this tends to get as much--if not more--attention as the rest of report.  As such, we were treated to a modest bounce back toward unchanged levels--similar in size to the modest bounce that followed ADP.

The net effects are Fannie 3.5s and 10yr Treasuries at effectively unchanged levels.