Since mid-day on Monday, domestic bond markets hadn't done much at all.  Despite a slightly expanding range, the momentum was sideways as both higher highs and lower lows were being made.  It wasn't until today that yields finally took a significant step outside that mostly-sideways range.  Unfortunately, it was a step in the wrong direction.

The easiest place to point fingers is at the 30yr Bond auction.  Objectively speaking, that's not a bad way to go, considering the mostly-sideways range was still "mostly intact" until then.  It may well have been the case that a stronger auction would have kept it intact.  Instead, the auction was exceptionally weak, even though bonds had already weakened in the run up to it. 

Auctions give investors a chance to see where other investors stand in a slightly clearer light than normal everyday trading.  Today, traders saw that wasn't much willingness to buy longer-dated Treasuries even after the morning's concession made yields more attractive.  A relatively high level of uncertainty as to the next inspiration for bond markets combined with the ongoing liquidity problems made for a swift reaction to the auction data.  While the weakness quickly found support and managed to hold it for the rest of the day, it was a full 7bps higher in 30yr bonds, 6bps higher in 10yr yields, and ultimately translated to 6/32nds of price weakness in MBS.