Bond markets improved overnight, but were under pressure in the morning after stronger ISM Manufacturing data and then again following the release of the Minutes from the December Fed meeting.  By the end of the day, a chart of 10yr Treasury yields looked like an EKG returning to a baseline.  One peak for ISM and a smaller secondary peak for the Fed Minutes.

Keep in mind that all of the above is occurring in a very narrow range.  Looking at the details too closely doesn't make much sense, but this is all the movement we have to talk about!

The ISM reaction was understandable as the "New Orders" component came in at the best levels since 2004.  The inflation component also ticked up noticeably, and it's this, more than anything, that gets the attention of bond markets these days when it comes to economic data.

Ultimately, with ISM not being a dedicated inflation report, bond traders were able to shrug it off.  Yields returned to the baseline before noon, with most of the bounce out of the way before 11am.

The Fed Minutes (which give a more detailed account of the conversation underlying the Fed's monetary policy decisions) gave more attention to the potential economic effects of the tax bill than the Fed's actual policy statement 3 weeks ago.  In short, the Fed assumes there could be some benefit from the tax cuts and they would try to keep economic growth steady by raising rates faster than previously anticipated. 

Unsurprisingly, this put some upward pressure on rates in the afternoon, but most of that pressure was seen in shorter-term rates.  After all, the Fed Funds Rate will always have the biggest impact on the shortest-term debt as it's the key overnight rate.

Bonds with 5yr durations and up managed to remain in stronger territory on the day (good for rates).  Still some lenders were merely 'unchanged' on the day due to bond market weakness late yesterday that was never passed along in the form of reprices.