Trade war trading struck back today, just when you thought you'd seen the last of it on Friday.  In this installment, news stories about various responses from China drove markets to dump stocks and buy bonds overnight.  In turn, that trading precipitated a snow-ball of short covering in bonds.

But more than anything, it was the move lower, and ultimate technical breakout in stocks that set the tone for the day.  Stocks had been holding somewhat sideways with respect to last week's range, but things began to change as domestic trading hours begin.  The process was sped along by news that China was slapping retaliatory tariffs on US imports, and again by the flood of liquidity and volume at the 9:30am NYSE open.

After trying to recover for a few minutes, stocks broke below Friday's lowest levels, thus precipitating technical follow-through that saw the S&P drop roughly 70 points on the day.  10yr yields dropped 7bps, and Fannie 3.5 MBS gained 7 ticks (0.22).