German Bunds dropped to yet another new all-time low today, hitting 0.193 at one point.  The Euro plummeted and stocks sold modestly.  All of the above helped bond markets find their footing heading into the domestic hours.  From there, MBS held fairly steady while Treasuries sold-off gently ahead of the 10yr auction.  10's never came close to moving above overnight highs.

After the mostly strong auction, we saw that 10's instead had their eyes set on moving back to overnight lows (2.096).  They were helped along in that process by the European close as traders exited positions that had been short Treasuries vs long European bonds for the European session.  The Euro currency was breaking a 10yr+ low at the same time, further fueling dollar/Treasury strength.

MBS outperformed in the morning and underperformed after the auction.  That's a pretty logical move considering 10's had more to worry about in the morning and could breathe a bigger sigh of relief after the auction.  The day ended with both MBS and Treasuries in just slightly stronger territory.