Bonds were weaker overnight in response to upbeat trade headlines from China's commerce minister as well as Italian political news (read the MBS Live update).  The morning's economic data passed without a trace, not that we would expect too much from a GDP revision or yet another Jobless Claims reading around 215k.   Things didn't pick up until the 9:30am NYSE open, which has been a focal point for morning volatility this week.  This time around, it pushed bond yields higher.  MBS followed with modest weakness, but not at the same pace as Treasuries.

Thus began the outperformance.  

Less than an hour later, headlines hit the wires regarding a European central banker downplaying the need for more stimulus and characterizing the market's expectation for an imminent rate cut as overblown.  Bonds didn't like that--especially core EU bonds and Treasuries.  MBS, on the other hand, didn't much care.  By the time the 7yr Treasury auction came out much weaker than expected, the Treasury complex was looking fairly nervous with 10yr yields up nearly 7bps.  

MBS, on the other hand, don't take much guidance from overseas central bank policy fluctuations and Treasury auction supply.  Not only that, but the mortgage market has been on the ropes enough to benefit from some rebound effect coming the other way.  All of the above made their outperformance noticeable today.  But don't take repeat performances for granted.  They will happen, but there's no guarantee on the timing.  Simply put: today was a victory.  We'll take it.