Throughout the week, we've been of the mind that last week's losses were overdone and this week's gains represented a correction to that unjustified weakness. By yesterday afternoon, bonds had fully retraced last week's move. The more bonds rallied this week, the more we saw the retracement as having run its course and the next move being data dependent.
There was some technical resistance in the recent Fed Funds Futures rally right from the start of the overnight session:
Overnight inflation data in Europe added to that move with almost every major European country apart from Spain (or in Germany's case, every major region) either reporting higher inflation (vs expectations or previous readings).
In general, this simply adds to the notion that bonds will be more data dependent now that this week's correction has run its course.
NOTE: this does NOT mean that rates are destined to move back up--simply that the more bullish default trading mentality over the past few days is probably giving way to something more data dependent and neutral by default.