Today had potential to be one of those days where overnight give way to a frustrating sell-off that intensifies throughout the day.  In fact, that wouldn't have been hard to imagine just before this morning's ISM Manufacturing data.  Yields were as low as 1.46+ in Europe, but had been steadily moving higher into domestic hours, ultimately approaching 1.51% before the data.

After ISM came out MUCH weaker than expected, the tone changed briefly but dramatically.  10yr yields almost instantly hit new lows for this rally cycle (1.429%).  We were wondering how much weakness or strength in the data it would take to produce a response given the current focus on trade war news and geopolitical events.  This was clearly weak enough to provide and answer, but even then, traders weren't interested in sticking with the chase.  

Weakness trickled in at a slow, steady pace, ultimately erasing around half of the post-ISM gains--at least for Treasuries.  MBS, on the other hand, outperformed significantly.  They never really lost any ground after the ISM-driven rally. One way to look at this would be to say MBS didn't rally nearly as sharply at 10am, so they didn't really need to give anything back.  The other consideration is that today was active for corporate bond issuance--something that places more specific pressure on Treasuries as opposed to MBS.