The overnight and early domestic sessions were both strongly positive for bond markets.  A more substantive Greek debt impasse kicked off the overnight trading tone.  On several recent occasions, what's looked like meaningful Greek news instead turned out to be uneventful.  This time has been different to some extent.  Greek yields spiked enough to suggest correlation with falling yields in Germany and the US (true Greek drama tends to push Greek and German yields in opposite directions).

With that, Treasuries were already in stronger territory at the start of the domestic session.  Weaker economic data helped the gains extend.  First up was New York Fed's Empire State Manufacturing, which came in at -1.98 vs a +6.0 forecast.  This isn't usually a big market mover, but it was good enough for a boost this morning.  Same story with Industrial Production data at 9:15am, which stood at -0.2 vs a forecast of +0.2. 

The second dose of data-inspired gains were short-lived though.  The bounce was also led by European bond markets, suggesting the rally may have had just as much to do with the tradeflow momentum discussed last week.  That's where traders who were previously aggressive sellers of bonds (during the past several weeks of rising rates) are now buying to square up trading positions ahead of the FOMC. The bounce was big enough for several lenders to put out negative reprices so far.