Bond markets pulled back overnight on a combination of global stock market stability and European data.  Selling pressure remained this morning as corporate debt issuance is active.  (That means that firms that were planning on issuing new debt saw this pull back in rates as good opportunity to pull the trigger.)  Even after a much weaker than expected Consumer Confidence number, bond markets haven't made any meaningful steps back toward positive territory.

All that having been said, there are several silver linings to this cloud.

First of all, a pull-back of some magnitude was to be expected simply because that's what tends to happen after any traded security moves in the same direction for long enough.  The size of the pull-back is non-threatening at the moment, with 10yr yields only up 3.4bps on the day.  Additionally, we're seeing reasonably strong signs of technical support at 2.266.  If nothing else, this gives us a great line in the sand to watch for additional weakness.  As long as we're holding under that, the pull-back would be a welcome ingredient of the broader move toward lower rates.

Finally, MBS are outperforming.  Consider this 'payback' for the recent examples of MBS not gaining as much as Treasuries over the past few weeks.  Fannie 3.5s are only off 3/32nds in price at mid-day.  10yr Treasuries, by comparison, are down 9/32nds.