Bonds began the day in slightly stronger territory (emphasis on "slightly").  The overnight session was calm and thinly traded with Japan being out of the office for the day.  European bond trading helped set a positive tone for US bond markets, but that began to erode shortly after the NYSE open (9:30am ET).

It would be fair to think that 9:30am weakness has something to do with the stock market--especially in light of the fact that stocks began making gains around that time.  Indeed, I wouldn't rule that out.   But stocks have been rallying fairly consistently since the beginning of the year and the upswings haven't been especially correlated to bonds, so perhaps there's something deeper going on.

For that deeper something, look no further than the "issuance" landscape.  This refers to new bonds coming to market (higher supply = lower prices and higher yields/rates).  In today's case, new corporate bonds siphoned investor demand away from Treasuries and MBS--especially in the case of a well-subscribed $2.5 bln offering from Toyota.  Investors are also cautious about buying bonds too aggressively ahead of the week's Treasury auction cycle.  That begins tomorrow with 3yr Notes, but gets most serious on Wednesday and Thursday with 10 and 30yr Treasuries respectively.

Although there was some weakness heading into the afternoon, it didn't turn into anything too threatening today.  In fact, 10yr yields rose less than 1bp to end at 2.48%.  The relative calm could change by the end of the week as we'll get another installment of the Consumer Price Index on Friday as well as Retail Sales for the month of December (which could show early effects from tax bill spending that economists currently underestimate).