Bond markets had been setting up for the extended weekend by being cautious about getting caught on the wrong side of this week's trade.  Consider the following factors:

• A perpetual trend toward lower yields in 2014
• Another more clearly-delineated trend lower in July/Aug
• Geopolitical flare-ups in full force
• An ECB meeting that might produce new news on QE

With these in mind, the bigger risk for bond market participants was that they wouldn't be set up for rates to go as low as they might keep going this week.  Long story short, there may well have been some excess positivity in bond markets heading into the weekend.  It's not an oversimplification to think of this like a fighting force raising defenses for an attack that never comes and then lowering those defenses.

This theme was all the more noticeable as the day's only significant economic data failed to generate much of a response.  Certainly, the reaction to the data was almost imperceptible compared to the overnight move in Treasuries.

MBS have been even less affected by the overall bond market weakness.  Fannie 3.5s are still holding above last Tuesday's weakest levels while 10yr yields have broken through theirs.