The overnight session began with markets showing their collective hand as stock prices and bond yields moved higher together.  It's as if the memo went out in the morning: "hey everyone, today's going to be a 'risk-on' day, so try to lean toward buying stocks and selling bonds."

Not everyone got the memo, but enough to create that general bias toward weaker levels in bond markets.  As usual, MBS are faring better than Treasuries in the face of the selling pressure, but as usual, we'll focus on the 10yr benchmark as a bellwether for broader momentum.

With that in mind, 10yr yields continue holding under the important ceiling of 2.04 even after extending the overnight weakness.  The additional selling came on the heels of this morning's economic data.  Unlike yesterday's data, which painted an almost dire picture of growth and inflation, today's data suggested consumer level inflation was steady and labor markets were strong.  I don't think bonds were reacting to the outright strength of TODAY'S data as much as they were letting down some of their guard from YESTERDAY'S.

10yr yields rose quickly over 2.02, but have thus far respected the 2.04 ceiling by a wide margin.  Most recently, they've continued to hold even while stocks have broken above yesterday's highs.  MBS are faring even better (retaining even more of yesterday's gains), with Fannie 3.0s down only 5 ticks at 101-20.  The weakness was essentially in place by the open and thus hasn't created any negative reprice risk.