This will largely be a rehash of the Mid-Day commentary as it captured all of the day's relevant themes.  The themes in question are at least threefold.  They include Europe, "positional" considerations, and reaction to the Fed (both immediate and ongoing).  A case could be made for several other themes, not the least of which would be corporate debt issuance, but these are the big three that I saw today.

Europe is clearly helping bond markets, though clearly not as much as we'd like.  Whereas Treasuries bounced at the beginning of this  week and have been sideways since then, European bonds have continued to rally.  Too, we're increasingly seeing pressure in the afternoon shortly after European markets close.  This was a factor today, and indeed we pulled back in the afternoon.

The fact that bonds remained in the green had to do with the positional considerations.  Namely, traders have been short (meaning they've sold bonds short in order to bet on rates moving higher).  Whether it has to do with some of the oddly dovish components of yesterday's Fed Minutes or the rapidly approaching holiday week, traders are cashing in those positions.  In the case of short positions, traders cash in by buying bonds--thus the boost in the morning. 

Definitively absent from this catalog of themes is any major reliance on economic data to provide guidance for bond market trading.  Today wasn't really the best test case for such a theme, considering the data was fairly close to consensus on all accounts.  Still, the stronger Philly Fed Index had the opposite suggestion from the actual price action, so if markets cared about data, it wasn't as much as they cared about the bigger themes. 

Despite the afternoon pullback, 10yr yields ended 2.7bps lower and Fannie 3.5s picked up an eighth of a point.