The overnight hours were unkind to Treasuries, and paradoxically so.  Although European yields did begin the day moderately higher, they quickly fell into positive territory.  Thus began the paradoxes.  European yields had no overt reasons to be falling.  Greek yields were rallying (typically an inverse relationship to core European yields) and economic data was almost universally stronger than expected (typically pushes yields higher). 

During that time, Treasuries were far less willing to follow German yields lower.  10yr yields bounced at 2.362 when the European rally had run its course and everything moved back in the other direction as the US trading session approached.  By the open, 10's were another 3bps higher.  US MBS don't trade overnight, so their opening levels quickly adjust to the current market realities.  In today's case that was good for an eighth of a point of weakness in Fannie 3.5s.

As the domestic session continued, so did the weakness.  It was led by Treasuries as opposed to Europe.  In fact, Treasuries consistently weakened vs German Bunds throughout the European session.  A few big corporate debt deals as well as hawkish comments from Fed's Powell added to this underperformance.  

Things changed at the 9:30am NYSE open.  Traders with short positions in Treasuries (betting on higher rates) booked their profits in order to free up cash for the stock session.  Stronger New Home Sales data was a non-event as the 'short-covering' rally commenced in bonds.  But the overnight resistance levels just over 2.36% came back to put a stop to the rally.  We've been drifting slightly higher in yield (or lower in terms of MBS prices) ever since.