We're once again seeing tradeflows overpower economic data in terms of bond market motivation.  Most of this morning's data was stronger than expected.  This would typically result in lower MBS prices and higher Treasury yields.

The opposite is true this morning, with both MBS and Treasuries moving back in line with Monday's levels.  That's not an extreme movement, but it does go against the suggestion of the data, as do the stock market losses.

In fact, equities have been highly correlated with bond yields in the past 2 weeks.  This speaks to the year-end tradeflow considerations we've been discussing where money managers are compelled to hold or close certain positions into the end of the year.  In other words, we may be seeing a fair amount of "asset allocation" trading whereby stocks benefited into year-end at the expense of bonds, with the phenomenon unwinding to some to-be-determined extent as we begin the new year.