NOTE: Bond markets close at 2pm Eastern today and normal trading hours resume on Friday.

There was not much to write home about in today's session, especially considering the short amount of time that's passed between now and the mid-day update.  We were waiting only for the 7yr auction at that time, and it turned out more-or-less as expected. 

The auction itself sucked (technical term).  Demand was low, and that stands to reason considering it happened on Christmas Eve just a few hours before the early close.  The yield was higher than expected, and it had to be in order to guarantee sufficient participation on such a day.

The reaction to the auction was mildly pleasant.  While we wouldn't normally see a rally following such a crappy auction, there was a better chance of that this time as markets were exceptionally anxious to get through this holiday-week cycle.  Yesterday's even-crappier 5yr auction really cranked up those defensive feelings, and by just about the right amount judging by today's results.  With that out of the way, markets were free to dial back the panic just a bit.  10yr yields ultimately dipped back into positive territory and MBS are now up nearly an eighth of a point as the early close approaches.