Even as stock markets have only managed to recover half of their losses from yesterday, longer-maturity Treasuries have nearly retraced the entire move.  In other words, yields are closer to yesterday's higher than stocks are to their highs (which were seen in futures markets in the morning before the 930am NYSE open).  In OTHER other words, bonds are underperforming.

The reason is fairly intuitive: supply.  A lot of debt has hit the market this week in addition to the already-scheduled debt from Treasury auctions.  Getting through the auction cycle was little consolation, thus reinforcing the damage done by corporate debt issuance this week.

The silver lining is that MBS are much less affected by the corporate bond glut.  Fannie 3.5s managed a scant eighth of a point of weakness today compared to 10yr Treasuries which lost a quarter point (in price).  In terms of rates, 10yr yields increased 0.03% while the extrapolated 'effective rate' in MBS markets rose only 0.01-0.02%. 

Despite the weakness, both bonds continue sending the same message as stocks (and everything else for that matter): markets are quickly taking their seats for next week's big show (Fed Announcement).  For bonds, this means an increasingly narrow range at slightly weaker levels.