The overnight session was fairly lackluster although volume clearly continues to build into the new year. 10yr yields traded a range inside the highs and lows offered by Wednesday's domestic session and opened this morning just slightly stronger until getting hit by a much stronger than expected ADP Jobs report (325k Private payrolls vs 178k forecast). Naturally, this thing has a history of being questionably correlated to private payrolls from Non-Farm-Payrolls reports, but the sad fact for bond-bulls and naysayers is that the two do line up fairly well over time. 

And so it is that Treasuries and MBS experiences by far, their biggest shockwave in terms of volume and price action following those numbers. 10's were fairly quick to acknowledge the overhead resistance at the 3-month trend channel and now sit just a hair over 2.00 as markets begin to digest the next iteration of labor market data of the morning which is the Jobless Claims report that just came out fairly close to consensus. So far, this hasn't added any selling pressure in bond markets. Fannie 3.5's are down only 3 ticks at 102-22. ISM Non-Manufacturing data is up next at 10am.

Here's the effect on 10yr yields and S&P Futures so far this morning:

And a screenshot from the MBS Live! Dashboard showing the relative outperformance of MBS (again), as well as price/yield levels across the board:

Although the ISM Non-Manufacturing numbers ahead aren't necessarily the biggest market mover in the world, the underlying concern is one of a general positioning ahead of tomorrow's NFP.  Thing of this like a runner in baseball taking a "lead off."  The bullish ADP numbers and the decent Jobless Claims figures basically offer no objection to the runner ("runner" in this case would be weakness in bond markets) taking an aggressive lead off.  So far, 10yr yields have pushed to the very edge of their long term trend channel:

Here's a run down of the data that's hit, and left to come today: