Bond market momentum had been negative all morning.  This began as early as 7:15am but kicked into higher gear with the stronger ADP data.  Mid-afternoon weakness in European bond markets spilled over to domestic bond markets in the run up to the 9:30am NYSE open.

The first noticeable bounce came at 9:30am, but didn't undo too much of the losses seen in the first few hours of trading.  The just-released ISM data is also helping bonds hold their ground.  The first reaction was slightly positive, but much like the 9:30am move, the emphasis is on "slight."

Here are a few ISM highlights:

• Headline ISM PMI 54.9 vs 54.5 forecast
• Prices 60.5 vs 66.4 forecast--lowest since November
• Employment Index 53.5 vs 52.8 previously

Construction spending data could also be helping the bounce (-1.4 vs +0.5 forecast).  

From here, we can watch the high yields of the day as a stop-loss for negative reprice risk (in other words, if 10yr yields hit 2.24% or higher, negative reprice risk would be increasing.  Otherwise, it serves as a base of operations, and we'll see how much progress we can make from there.  Breaking below 2.21% would be the first real victory.  If we make it that far, we'll discuss other levels to watch in a separate update.  The biggest immediate risk is that the 8:30am low yields end up acting as a floor for the current post-ISM rally.

10yr yields are currently up 2bps on the day at 2.227 and Fannie 3.5s are an eighth of a point lower at 103-03.