We're now getting some fairly clear signal from bond traders in light of three developments that would normally be headwinds.  First off, the existing rally is sharp enough over the past 3 days that we shouldn't be surprised to see some technical resistance (i.e. bonds may need to correct and consolidate even if they ultimately continue to rally).

In terms of external factors, stocks began rallying shortly after the 9:30am NYSE Open.  While bonds paid some attention to that, the move was so small that it's not worth mentioning.

Then at 10am, the New Home Sales data (a big 17% surge) helped stocks even more and caused bond yields to reconsider the morning rally once again.

BUT... that only lasted 9 minutes!  After that, bonds continued to their best levels of the day by 10:30am.

So to recap, we have:

• A bond rally that could arguably meet selling pressure simply due to its own technical factors
• A stock rally that connotes some pressure on bonds
• A piece of super strong economic data that connotes some pressure on bonds
• Yet bond markets defy all of the above and progress to even stronger levels

To me, those bullet points are akin to bond traders showing their hands (hands that want to push the "buy" button).  The only reservation I'd have at this point would be the possibility that the month-end trading environment is adding a bit of extra buying demand.  But even if that's the case, tomorrow's NFP would still be a more important motivation for the next move.

For now, for today, this is good stuff.  10yr yields are down 2.8bps at 2.65%.  Fannie 4.0 MBS are up just over an eighth of a point at 102-11 (102.33).