Domestic economic data, as expected, was passed over in favor of more meaningful forces.  At the moment, those forces include Eurozone economic conditions and the broad-based flight to safety that helped bond markets and hurt risk assets yesterday.  That flight-to-safety has generally taken a step back today after an important Eurozone inflation report showed core inflation was slightly higher than expected.  This outweighed the drop into negative territory in headline inflation.  All that having been said, German 10yr yields still closed below 0.50--territory they only entered for the first time this week.

All told, the selling pressure has been far more modest than history would suggest.  In the past when bond markets have rallied for 7 days in a row culminating in a big move to long-term lows, the following day stands a better than average chance to see a big move in the other direction.  While we are indeed moving in the other direction, it's not exactly 'big.'  Fannie 3.0s are down only a quarter of a point and 10yr yields are up less than 4bps--neither of which is outside yesterday's trading range.