Treasuries were weaker at the start of the overnight session as renewed US/China trade negotiations propelled global equities markets higher.  The hallmark of yesterday's overnight session was a sharp drop in Chinese stock futures which spilled over to US markets throughout the day.  In other words, today was a reversal of yesterday.

Granted, the trade-related news wasn't the only motivation, but it was definitely in play when Chinese equities opened at 9:30pm.  Before that, there were some positive undercurrents in place from the morning's economic data.  An exceptionally and surprisingly weak Philly Fed Index fueled a moderate rally at the that lasted until the 9:30am NYSE Open.

From there, US equities took over as the key guidance-giver for bonds.  Stocks spiked at the open and Treasury yields followed, ultimately threatening to break above the recent highs near 2.90%.  As Chinese after-hours trading wrapped up and US stocks topped out, bonds began calming down.  

10yr yields ended the day nearly unchanged +0.55bps at 2.87%.  Fannie 4.0 MBS, which received less benefit from yesterday's Treasury gains and less damage from today's Treasury weakness, managed to end 1 tick into positive territory at 101-26 (101.80).   Trading was markedly calmer versus the past few days in terms of volume.  That trend could continue tomorrow, depending on news headlines.  It's certainly that time of year with respect to traders tuning out for summer activities.  Lower volume and lighter liquidity can exaggerate imbalances, thus making for bigger, less logical moves.