Today wasn't necessarily a worst-case-scenario for bond markets, but it was reading from the same script.  It's the version of the story where the economic data is weaker than expected, but where bonds sold off anyway.  From yesterdays close of 101-28, Fannie 3.0s are trickling sideways at 101-14 in late Friday trading.  10yr yields meanwhile are up 7.3bps at 2.108. 

Traders were obviously waiting to make sure the data wasn't weak enough to ruin their selling plans.  With the employment component of ISM Manufacturing at the lowest levels since September 2009, it was arguably plenty weak, yet traders sold bonds anyway. 

As we discussed in advance, this is not what we wanted to see.  It suggests an ongoing, deeply-rooted negative bias in bond markets.  Secondarily, it confirms that yesterday afternoon was indeed fueled by month-end bond buying.

Long story short, all of the cautionary hypothesizing we've been doing in April LOOKS like it's in the process of coming to fruition.  It makes sense to guard against that eventuality until it can be ruled out.