I was getting ready to write something for today's headline along the lines of "econ data merely a sideshow for supply."  The point would have been that today's economic data (Jobless Claims, Import/Export Prices, and Wholesale Inventories) was relatively unimportant compared to the final Treasury Auction of the week as well as the ongoing potential for a deluge of corporate bond issuance.  But then I came to my senses!

First of all, that's a pretty confusing sentence.  Second of all, the 'supply' itself is merely a sideshow in the bigger picture, and yesterday served as a stark reminder of that. 

So what does all that mean?  Simply put, yesterday was volatile because of all the new debt hitting the market at the same time (Treasury auction + corporate debt).  We don't follow corporate debt prices, and they vary greatly from bond to bond, but their general presence provides a general input for the rest of the bond sector.  When there is more supply, things are tougher for the rest of the bond market. 

This was easy to see yesterday morning.  Then, yesterday afternoon, we saw how quickly markets got over the supply considerations.  With the auction over and the corporate debt being sold off, bonds found their footing almost immediately and returned perfectly to the same old pre-Fed range.  So until we actually see something new and different happening, we're still biding our time ahead of next week's FOMC Announcement on Wednesday.