The next two days are potentially the biggest so far this year for bond markets.  The key issue will be the European Central Bank's policy announcement.  At this point, the word on the street is that there's an extremely high likelihood of rate cuts, a low likelihood of outright asset purchases and a decent chance of a more middle-of-the-road liquidity measure (like the previously used LTROs or "long term refinancing operations").  As to what combination of potential tools will result in which direction of bond market movement, it's anyone's guess. 

There are too many possible combinations and not enough consensus on what the winning combo might be.  Add to that the fact that markets have clearly traded with anticipation for at least SOMETHING to happen tomorrow, but have also clearly been trading for other reasons as well.  Just like when experts couldn't agree on what the actual net effect on rates was from QE, we can't know what amount of easing is already priced in to bond markets as we consider potential European QE now.

Today's data certainly didn't seem to matter as much as normal.  Bond market movements were HIGHLY technical in nature--meaning they look more like they were scripted by a machine than by human emotion and reason.  In general, trading simply leveled off near yesterday's latest levels.  That's the best performance of the past 4 sessions, but unfortunately rates have been moving up at a healthy clip during that time.  Still, it's better than a sharp stick in the eye, even if only slightly.

This sort of mechanical "leveling-off" is one of the two main moves we see ahead of big data.  It's the bond market's way of saying "OK, the parade is about to start, and we think we found our seats."  At 2.60+ in 10yr Treasuries, these particular seats are right on the upper edge of the road that yields have been traveling since April.