Bond markets were already trading weaker following a risk-on move in Europe, but yields are moving even higher following the Productivity and Costs data.  "Labor Costs" came in at +3.0 vs a median forecast of +2.5 (and +1.3 previously), which suggests increasing wage pressure.  Increasing wage pressure suggests increased inflation prospects.  And increasing inflation prospects are unfriendly toward bonds.

10yr yields are up 2.9bps this morning at 2.35 and Fannie 3.5 MBS are down an eighth of a point at 102-18