• NY Fed Manufacturing 
  • 10.1 vs 6.7 forecast, 3.7 previously

Bonds were flat to start the overnight session despite some corrective weakness in Chinese equities.  In fact, whether we're looking at the Shanghai or Hang Seng, Chinese stocks fell back to the levels seen before last Friday's big economic data (you know... the stuff that allegedly caused US bond yields to spike?).   If Friday's correlations were legit, we'd expect at least some acknowledgement from bonds, but the chart doesn't lie:

Maybe bonds were ready to sell for other reasons, and now they're ready to hold sideways near this big-picture pivot point until getting their next major cue.  

There was a bit of unrelated volatility as London began its trading day.  Bond yields moved higher at first and then settled back near unchanged territory before drifting higher again heading into US trading hours.  The 8:20am CME open saw stronger buying, and while that was quickly reversed after the 8:30am CME data, buyers (many of whom are simply covering shorts) have been more than willing to try to reinforce a ceiling at 2.56-2.57%. 

10yr yields are currently in positive territory, but just barely.  Fannie 3.5 MBS are unchanged on the day and 3.0 coupons are down 3 ticks (0.09).