Trading conditions continue to be slow during these holiday weeks.  This greases the skids for bigger movements regardless of motivation.  Last Wednesday saw significant weakness, and while it was most easily chalked up to the strong GDP reading, we already discussed (HERE) why and how that wasn't the case. 

The bright side to that weakness is that it flushed out sellers (or rather, rolled them up in its snowball).  The result has been slow, steady gains ever since, with a bit of a shot in the arm from yesterday's Eurodrama.  I would note though, that US bond markets held remarkably more true to their trend than they otherwise would, given the European bond market movements.  That's just an observation about year-end tradeflows having a mind of their own and not really caring about data or events except as absolutely necessary. 

The gains now bring Treasuries back in line with levels seen on the morning of Dec 23 (before the sell-off).  MBS are doing even better.  Not only are they back through Wednesday's levels, but if they close today at current prices, it would be the 3rd best day this year.