Just as yesterday's domestic trading hours ended, British Prime Minister Theresa May met with EU leaders to try to tweak the Brexit proposal enough to gain the support of hardliners in the UK who would prefer to cut all ties over compromise.  That said, a deal with some compromise is thought to be passable in British parliament, assuming it addresses hardliner's concerns over the border situation between Ireland and Northern Ireland.  A hypothetical agreement that avoids a hard border between EU member Ireland and UK constituent Northern Ireland is referred to as "the Irish backstop." 

(Yes, this stuff is fairly confusing, and the above is a bit of simplification.)

At the start of the overnight session, it looked as though enough progress was made on the backstop to reinvigorate prospects of a passable Brexit deal.  This led UK currency and bond yields higher with German and US bond yields following.  Bottom line here is that a passable Brexit deal is positive development for risk-taking in markets (read: higher rates).  It decreases uncertainty and potentially preserves more economic growth than alternatives.

In the early morning hours, the counterpoints began to fly.  Most notably, Britain's attorney general said that the newly negotiated changes failed to address the legal risk surrounding the backstop.  This prompted a bond market rally and selling spree in British currency.  In short, a Brexit deal waxed early and waned late in the overnight session.

Granted, US bond markets didn't follow these developments in lock step, but it's worth keeping in mind that no one figured Brexit would be completely solved or completely shot down in one night.  The willingness to respond to Brexit-related developments on the part of US bond markets is a clear and important piece of the momentum narrative going forward.  It may not be the most meaningful market mover, but whenever big changes are afoot, it  is almost guaranteed to play a supporting role.

As the domestic session got underway, other market movers were vetted.  In today's case, it was slightly weaker CPI data.  The positive reaction in bonds confirms that at least a few investors have been at least a little bit concerned about some inflation cues over the past month.  The movement following CPI compared to the movement seen on the Brexit headlines gives us a good sense of the relative importance US bonds assign to each.