The biggest story and smallest surprise of the day was the fact that trading conditions in bond markets were extra light.  Between the market closure in London and the simple fact that it was the Monday of the last week of Summer, volume struggled to rise above the weakest levels of the year.

With London closed, US Treasury trading got a late start overnight.  Even when the rest of Europe is open, Treasuries depend on London being open for late overnight trading.  By the time they came on line and got caught up to the rally in German bond markets, Treasuries began the day almost 2 ticks lower.  MBS opened roughly 4 ticks higher and neither would see any stronger levels for the rest of the day.

That said, neither MBS nor Treasuries saw any significant weakness either.  A strong move to new all-time highs in stocks combined with the German bond market pull-back from new all-time lows to put pressure on bonds mid-morning.  Treasuries and MBS hit their weakest levels just after 11am and spent the rest of the day drifting inconsequentially sideways.