Bond markets began the overnight session in fine shape.  Global markets were shedding risk after weaker Chinese manufacturing data.  But the gains were short-lived.  When European markets began trading, stocks and bond yields moved higher on a combination of decent data and soothing central bank speeches.

By the start of domestic trading hours, US bond markets were only in slightly weaker shape.  The negative momentum continued through 11am, bringing MBS and Treasuries close to yesterday's weakest levels.  We've managed to bounce a bit since then, but there certainly hasn't been a convincing comeback yet.

Corporate bond issuance continues adding supply pressure during a week that already has more than $100 bln of various Treasury debt being auctioned.  This notion of "supply" is a very real issue for bonds--especially Treasuries, because they're used as the basis for corporate borrowing rates as well.  MBS tend to fare a bit better during this sort of pressure, and today is no exception.  Fannie 3.5s and 3.0s are both only an eighth of a point weaker as the 5yr auction approaches.