The story of today is largely a two-parter, and a fairly simple one at that.  Part 1: bonds weaker in Europe.  Part 2: bonds stronger in the US.  The end. 

In all seriousness, the day is not much more complicated than this.  Bond traders are not approaching this week with the goal of big rewards for big risks.  The mindset is more in line with merely avoiding losses and drama until the relative return of liquidity next week.  Indeed, today's volume is already noticeably impacted by the holiday week, as is the trading itself.

Case in point, There was a nice little surge lower in yields that started around 8:20am.  We only see those 8:20am movements when liquidity is very poor or if there's simply a total lack of inspiration in the bond complex.  Reason being: 820am marks the beginning of the day for several classes of traders that keep hours with the bond pit at the CME.  While CME futures trade through most of the night, the pit itself opens at 8:20am.  It's not just guys in funny jackets waving their arms.  There are desks and offices at the CME that execute trading electronically but that still adhere to the 'open outcry' hours of the pit.

All that to say a noticeable move at 820am simply means that liquidity was so thin that the simple addition of this group of traders was enough to make a clear difference.  In more liquid conditions, 820am frequently passes without a trace.

Today it marked the awakening of domestic markets as Treasuries pulled away from the European bonds that had been dragging them down overnight.  There has been no discernible reaction to any of today's data.  Tradeflows continue to account for all of the movement.  MBS are now 1 tick into positive territory and 10yr yields are down 1.4bps.  The afternoon has seen a bit of a boost for bonds, but that should be attributed almost exclusively to Europe being closed for the day.