It looks like the nail is in the coffin for the pre-NFP rally potential.  There was some small chance today (emphasis on 'small') that economic data could have been weak enough to avoid arguing against last week's weaker economic themes.  Had that happened, we might have seen bonds markets doing a much better job of holding recent gains, or even erasing some of yesterday's weakness.

But it's not happening.

The first clue came after this morning's weaker ADP data.  Payrolls came in at 185k vs 215k forecast and a downwardly revised 229k from last month.  Certainly, that's weaker than expected, but markets didn't think it was weak enough to support last week's gloomy mood.  There was a brief rally, but it quickly changed course and gave way to additional moderate losses in the morning hours.

No matter!  We still had ISM Non-Manufacturing coming up and perhaps IT would be weak enough to paint the necessary picture for better bond market stability.

No dice.

ISM came in at a balmy 60.3 compared to a median forecast of 56.2.  Moreover, the employment and inflation components were stronger as well (unlike Monday's sister report).  Bonds did not like this one little bit, and green light for the pre-NFP correction shone brighter.  10yr yields jumped up to 2.293 at their highest levels and Fannie 3.5s were as low as 103-02, more than 3/8ths of a point lower on the day.  Some lenders have already repriced for the worse.