With this morning's ECB events merely causing volatility that resulted in essentially no change in trading levels, the most interesting aspect of the day became the ability of MBS to hold their ground despite a more concerted sell-off in Treasuries.  For example, Fannie 3.5s were down only 4 ticks (an eighth of a point in price) today while 10yr Treasuries shed 3/8ths of a point.  In terms of yields, mortgage rates were unchanged while 10yr yields were up 4.5bps. 

This is a much bigger variation in performances than we normally see--even among days where we note "MBS outperform, etc."  Fortunately, it's not without its potential reasons.  Here are the top contenders:

1. Treasuries are more closely related to European bond markets, which have been an active trading consideration yesterday and today in the run up to this morning's ECB events

2. Next week is the quarterly refunding for Treasuries, meaning they'll have a slightly more difficult time if yields are too low heading into the auctions.  As such, markets can err on the side of higher yields before those auctions, thus making the process smoother by drawing in more involvement.

3. The corporate bond market is active at the moment, and Treasuries are often used as a hedging vehicle for the corporate bond issuance process (because Treasuries often form the basis for the pricing, firms can sell Treasuries to hedge a portion of their interest rate risk the same way a lender would sell MBS to lock in a loan).

Explanations aside, today was calm enough that the emphasis is now firmly on tomorrow's NFP ('nonfarm payrolls,' the primary component of the Employment Situation Report at 8:30am).  All the recent weakness sets us up with every possible chance of seeing a resilient bond market even if the initial reaction is weaker.