Treasuries began the overnight session moving to even higher yields than those seen on Friday afternoon.  Just after 4:30am, German Bunds put in a strong bounce on their high yield ceiling from Friday and Treasuries reluctantly followed.  10yr yields made it back to 'unchanged' territory by 8am. 

MBS opened right in line with Friday's latest levels and improved out of the gate.  The 8:30am Empire State Manufacturing data was stronger than expected, but had no ill effects on bond markets.  The 9:15am Industrial Production data was much weaker than expected, and possibly had an effect on bond markets, but it's easy to be skeptical considering the trend was already improving and other economic data has been so inconsequential recently.

Bottom line, it looks like we're in the midst of another modest correction following another push higher in the generally ugly September trend.  Markets are perhaps ready to hunker down for the much-anticipated FOMC events on Wednesday afternoon.  Keep in mind though, the last time we saw  this sort of correction (last Thursday), bond markets were doing well in the morning only to turn negative in the afternoon.  If that happens again, it wouldn't be a big surprise.  If it doesn't happen, it would further confirm that notion of "hunkering down" ahead of FOMC.