Treasury's and MBS overnight improvement continued into the 8:00 hour until 8:30 data hit.  At that time, you'll be able to see marginal losses in MBS and a concomitant back up in tsy yields.  This weakness, however, didn't take either of those markets to yesterday's weakest points. 

MBS are currently 3 ticks better at 100-10, vs. yesterday's close of 100-07.  The 10yr yield is down to 3.75 currently after being as high as 3.80 yesterday.  But the strength has neither taken MBS to yesterday's highs at 100-19 or tsy's to yesterday low yields at 3.72.  Any movement outside yesterday's trading range will likely be reserved at this point for the trading reaction to the 30yr bond auction coming up at 1pm. 

at 10am, business inventories came in stronger than expected: +0.4% vs. 0.2% consensus.  However, this has had little, if any discernible impact on trading as prices have moved both higher and lower since the report to arrive at mostly unchanged levels.  

Recall that yesterday saw a bit of a preemptive concession get built into to bonds before the auction.  This is apparent with a glance at the 1030am - 1pm trading.  We have yet to see a similar move today.  But the moral of the story is simply that IF it comes, it's likely to be nothing more than "anticipatory" in nature and not the sort of weakness we'd want to draw meaningful conclusions about without seeing how things shake out after the auction.

We'll be here with the play by play as always, and remember that "reprice for the worse" posts get precedence, so if we don't get commentary out to you immediately at 1pm it either means that there is insufficient directionality to justify a call or that it is positive to the extent that we're not concerned about reprices for the worse.