With the end of the month/quarter out of the way, bond markets may now have more capacity to tune in to the week's economic data.  But when quarter-end has been biased in one direction, the beginning of the new quarter can sometimes act as a bit of a correction.  This possibility is reinforced by the charts, where several technical momentum gauges have been stalling out.  Beyond that, yields themselves have simply been bottoming out.

That's the bearish case for bonds/rates/MBS, but it's never black and white.  The bullish case isn't exactly bullish through and through, but rather, is an opportunity.  It's all about NFP Thursday. 

NFP (and the boatload of other data that comes with it on Thursday) should serve to prevent any crazy moves over the next two days.  From there, if the balance of Thursday's data is bond-friendly, it could be the key to unlocking the sub 2.50% (10yr yield) range that's eluded us for nearly a month.  Again though, that's predicated on the data being weak and on the European Central Bank being bond-friendly.

Today's data is--though it's impact may be muted by looming NFP--remains nothing to be trifled with.  ISM Manufacturing is one of the very few runners-up to NFP when it comes to market-moving clout.  It doesn't always draw a crowd, but on average, few reports apart from NFP are more consistent in causing volume and volatility.  As noted yesterday, the big-picture view on ISM is that of a parabolic improvement.  Anything near consensus simply reinforces that and would likely be bad for MBS/Treasuries, but if it happens to be near the lower limits of this trend, it could keep hope alive for the rate rally that otherwise looks to be bottoming.