Heading into Christmas, US bond markets began pulling away from European markets in a mostly unfavorable way.  In other words, Treasuries and MBS were losing ground while European bond markets weren't. 

The nature of year-end trading suggests that we don't read too much into such weirdness as it's rarely ever backed up by true trading conviction.  Instead, late December tends to be more serendipitous and early January--all things being equal--tends to see a reversal/correction of the serendipity.  It's generally the same story with the Thanksgiving holiday, and it happened the same way this time.

The 'new year reversal' wasted no time in getting underway last Friday.  With today's improved liquidity, it continued in full effect.  The chart below shows how Treasuries haven't even come close to catching up with European bond markets, but the zoomed in and rescaled view shows how today's outperformance gets them one step closer.

MBS, as usual, are following the path set by Treasuries, but as usual, on a smaller scale.